Readers of Antoine De Saint-Exupery’s The Little Prince may recall the hatlike appearance of the snake that swallowed an elephant. After the festive season, some may empathise with that swollen reptile. The private equity industry has ended 2023 in something of a similar state. Private equity companies have struggled to find buyers for their portfolio companies for a number of years now. Companies have had their hands full managing snarled-up supply chains and rampant inflation. Opportunities for successful initial public offerings are few and far between. High valuations for private equity portfolio companies have not helped. READ MORE
Why Does Private Equity Get to Play Make-Believe With Prices?
If you wanted to come up with the one-liner about investing most likely to make my head explode, you might try, “The way to choose investments is to just jump on whatever’s done the best over the past three to five years.” Or, getting more creative: “Hey, did you know Cathie Wood is still getting inflows?” Yet more creative: “The war in Ukraine was caused by stock buybacks.” But you couldn’t do much better than “Interim valuations don’t really matter,” as Christopher Schelling says in reference to private equity investing. If exploding my cranium was the goal, then well played, sir. Otherwise, oh, hell no. READ MORE
Litigation Finance Drives Profits For Private Equity And Venture Capital Firms And Their Lawyers
Lawyers representing private equity and venture capital portfolio firms understand that their clients routinely face important business decisions about whether to initiate meritorious litigation claims that could result in substantial recoveries.
Yet convincing their clients to move forward with litigation—no matter how lucrative it may ultimately be—is another matter entirely. The main culprit for this hesitancy is a simple one: PE and VC firms are loath to saddle their portfolio companies with the expense of litigation when that precious capital could be used to enhance a company’s operations or develop new products. READ MORE
Private equity wakes up to outsourcing
An outsourcing trend is sweeping through the offices of fund managers and investors, as new technology solutions and providers emerge.
While fund administration and back-office accounting are still the first and most common functions to be outsourced, the trend is starting to hit investor relations and portfolio management too. READ MORE
Private equity firms put focus on talent before backing new deals
Private equity firms are looking harder than ever at how well companies are positioned to retain and attract talent when considering new investments, as waves of employee turnover continue to ripple across nearly every industry.
Analysing company talent has long been a part of deal due diligence at private equity firms, but industry experts say the issue is now coming up much earlier in the process. The conversations are focused on employees at large, rather than just senior management roles, particularly when it comes to employee turnover. READ MORE
SEC Chair Gary Gensler wants to know more about what hedge funds and private equity are doing
Securities and Exchange Commission Chair Gary Gensler has kicked off an ambitious regulatory agenda — and his agency is pushing forward with key measures focused on hedge funds and private equity.
The federal agency is meeting on Wednesday to consider three new rules: more disclosure from hedge funds and private equity funds, more disclosure regarding cybersecurity risks and attacks, and shortening the date on which stock transactions must be settled, a fallout from the GameStop saga. READ MORE
SEC proposes basic rules for private equity, hedge funds
The financiers atop the growing $18 trillion field of private funds — hedge funds, private equity funds and others — would be required, under a new proposal from federal regulators, to provide investors with quarterly investment statements regarding fees and returns.
Although the proposal requires these firms to provide only basic information to investors, the proposal was described as a “sea change” in federal regulation because the Securities and Exchange Commission largely has steered clear of mandating disclosures for such investments. READ MORE
Establish a Productive Private Equity Partnership
After an unpredictable and turbulent start, the turn of the decade marks the private equity (PE) industry’s coming of age. Despite initial volatility, McKinsey’s annual review found that fundraising activity across private markets reached an all-time high of $7.3 trillion in 2020, of which PE accounted for 61% and was the biggest driver of this growth. Zeroing in on the U.S., PitchBook’s analysis indicated that PE deals and exits are on pace for a record-setting year in 2021. READ MORE
Democrats revive legislation to crack down on private-equity buyouts
A handful of the nation’s most powerful Democrats on Wednesday introduced private-equity legislation that, if passed, would represent one of the largest crackdowns on the industry in decades.
The bill, known as the Stop Wall Street Looting Act, would prevent private-equity funds from forcing companies they purchase to take on new loans to extract dividends they could not otherwise afford. READ MORE
NEXT BILLION-DOLLAR STARTUPS
For the seventh year in a row, Forbes has teamed up with TrueBridge Capital Partners to search for the country’s 25 venture-backed startups most likely to become unicorns. TrueBridge asked some 300 venture firms to nominate companies, while Forbes reached out directly to 80 startups. Then came the deeper look, as we analyzed finances and interviewed founders and investors. A $1 billion valuation isn’t what it used to be, as companies reach that milestone at breakneck speed. Even startups with barely any revenue are earning sky-high valuations as investors bet on future growth. READ MORE
Why Are Private Equity Firms Passing on More Administrative Costs to Allocators? Because They Can.
Management fees have held steady, but general partners are shifting more administrative costs and other fees on to their investors READ MORE
Private equity is ready to take MSP consolidation to the next level
The outlook for managed services providers (MSPs) remains positive, as increasing complexity and security concerns — driven by the work-from-anywhere environment and high-profile hacking incidents — have moved IT management from being a cost center to a core strategic priority for the C-suite. READ MORE
Private equity’s push into accounting
More than a few eyebrows were raised in August when the news broke that TowerBrook Capital Partners had struck a deal to purchase an ownership interest in EisnerAmper LLP, the first such deal between a private-equity concern and a top 20 accounting firm. READ MORE
Private equity firms use more debt to score midmarket deals
Private equity deal activity involving midsize companies is running at full tilt as cash-flush lenders help buyout firms finance acquisitions, driving leverage to levels not seen since before the financial crisis.
Private-equity firms invested a total of $264.6 billion across 1,721 midmarket deals in the U.S. during this year’s first half, or more than two-thirds of the $393.5 billion invested across 2,662 deals in all of last year, according to research provider PitchBook Data Inc. PitchBook said the industry is on track to surpass the record annual total of $416.3 billion for the segment reached in 2019. The researcher defines the U.S. “core” midmarket as businesses valued from $100 million to $500 million. READ MORE
An Unprecedented Year For Private Equity Is Spilling Into The Middle Market
The private equity industry is in the midst of its most prolific year ever, with buyout firms striking deals and spending cash like never before.
The surge in spending has been driven in no small part by mega-deals, like the $30 billion acquisition of Medline Industries that a trio of private equity heavyweights lined up in June. But it has also been fueled by a steady stream of smaller takeovers—“smaller,” in this case, meaning hundreds of millions of dollars instead of billions. READ MORE