Private equity firms using companies debts to enrich themselves.
A report published by the private equity industry showed us that companies paid dividends and bonuses with debts, despite of the warnings of the rating agencies. A group of 47 private equity- owned firms had a combined debt of £13bn before they were taken over and have now a combined debt of £71bn. That's one of the negative effects private equity firms have. Most of the time it's necessarily, to become more profitable or to grow but not in such an explosive way. The problems for these firms are on a longer term (when private equity firms redraw their investment) and could form a treat for their further existing. An enormous debt, that has to be paid off and a lower quality debt which is more expensive for these companies.
So private equity firms have to implement more the rule of corporate governance to secure the further existing of these companies.
http://www.guardian.co.uk/business/2009/dec/10/private-equity-profiting-from-debt
dinsdag 15 december 2009
strategic vs financial investors
Private equity buyers are still dominating the world of M&A. This makes it difficult for strategic buyers to win deals. This is illustrated by the example of Avaya and Silver Lake. Silver Lake is a private investement company who is striving for profit by investing in the existing company Avaya. They want to exploit the existing customers.
Strategic buyers who are aiming for synergie effects cannot buy such a companies as easy as in the 90's. In the 90's expensive deals were often justified by claiming that it would pay off because off the synergie effects. Now the private equity companies who work with a balance sheet free of debt are able to make the highest bid. The strategic buyers cannot overbid the financial buyers these days.
http://www.businessweek.com/the_thread/dealflow/archives/2007/05/avaya_a_near-pe.html
Optimistic reviews of optimistic analysts
Tuesday 12 feb 2008: According to 'Herman Daems' in 2008 the private equity market will continue to boom and is here to stay in Belgium. Although there is a hesitation in the market for the bigger deals, the small-and mid cap market is still booming. He was optimistic because of two reasons. The market is still small in belgium. In 2006 1.5% of all european private equity investements were in Belgium. And second, our banks survieved the subprime crisis without very much damage.
We all know what happened in september that same year so it doesn't have to suprise that private investments over 2008-2009 didn't skyrocketed but fell down. The private funds had to secure there cash.
This illustrates also the predictions of most analysts. Always stay on the wave.
http://www.express.be/sectors/nl/finance/private-equity-blijft-een-voorname-rol-spelen-in-belgi/90462.htm
Private equity buyers are still dominating the world of M&A. This makes it difficult for strategic buyers to win deals. This is illustrated by the example of Avaya and Silver Lake. Silver Lake is a private investement company who is striving for profit by investing in the existing company Avaya. They want to exploit the existing customers.
Strategic buyers who are aiming for synergie effects cannot buy such a companies as easy as in the 90's. In the 90's expensive deals were often justified by claiming that it would pay off because off the synergie effects. Now the private equity companies who work with a balance sheet free of debt are able to make the highest bid. The strategic buyers cannot overbid the financial buyers these days.
http://www.businessweek.com/the_thread/dealflow/archives/2007/05/avaya_a_near-pe.html
Optimistic reviews of optimistic analysts
Tuesday 12 feb 2008: According to 'Herman Daems' in 2008 the private equity market will continue to boom and is here to stay in Belgium. Although there is a hesitation in the market for the bigger deals, the small-and mid cap market is still booming. He was optimistic because of two reasons. The market is still small in belgium. In 2006 1.5% of all european private equity investements were in Belgium. And second, our banks survieved the subprime crisis without very much damage.
We all know what happened in september that same year so it doesn't have to suprise that private investments over 2008-2009 didn't skyrocketed but fell down. The private funds had to secure there cash.
This illustrates also the predictions of most analysts. Always stay on the wave.
http://www.express.be/sectors/nl/finance/private-equity-blijft-een-voorname-rol-spelen-in-belgi/90462.htm
Study Finds Lag in Private Equity Fund-Raising
Fund-raising dropped to its lowest level since 2004. Private equity funds are finding it harder to raise money this year because of the financial crisis. If investors still choose for a private equity fund they go for the big ones. The funds are also taking more time in 2009 to gather the money they need. The reasons for this are that many companies that had a lot of debt where owned by the private funds who were big shareholders. Not only the results of the market are causing the slowing down of gathering money, the funds themselves are also guilty. Because of the wild and uncertain markets they have a lot of not used cash so it is difficult to ask for new cash if you haven't invested the old cash from the good years.
Fund-raising dropped to its lowest level since 2004. Private equity funds are finding it harder to raise money this year because of the financial crisis. If investors still choose for a private equity fund they go for the big ones. The funds are also taking more time in 2009 to gather the money they need. The reasons for this are that many companies that had a lot of debt where owned by the private funds who were big shareholders. Not only the results of the market are causing the slowing down of gathering money, the funds themselves are also guilty. Because of the wild and uncertain markets they have a lot of not used cash so it is difficult to ask for new cash if you haven't invested the old cash from the good years.
http://dealbook.blogs.nytimes.com/2009/12/15/study-finds-lag-in-private-equity-fund-raising/
The money behind the private equity boom
The private equity companies are still booming. They have raised more money and announced ever larger deals, but where is this money coming from? It's coming from what they called limited partners such as institutional investors or large pension funds.
But why have they chosen for private equity? Because of the larger annual returns, compared with these of the public market, lots of large investors created their own private equity firm or invested their capital in one of the existing ones, in order to get a piece of these giant returns. An other advantage for the private equity firms is that there is the possibility to dig deeper into the books of a company they want to acquire. So this allows them to do better. And at last, big institutional investors would destroy a stock share if they tried to sell it, because public capital is more liquid.
http://www.businessweek.com/investor/content/nov2006/pi20061107_031256_page_2.htm
The private equity companies are still booming. They have raised more money and announced ever larger deals, but where is this money coming from? It's coming from what they called limited partners such as institutional investors or large pension funds.
But why have they chosen for private equity? Because of the larger annual returns, compared with these of the public market, lots of large investors created their own private equity firm or invested their capital in one of the existing ones, in order to get a piece of these giant returns. An other advantage for the private equity firms is that there is the possibility to dig deeper into the books of a company they want to acquire. So this allows them to do better. And at last, big institutional investors would destroy a stock share if they tried to sell it, because public capital is more liquid.
http://www.businessweek.com/investor/content/nov2006/pi20061107_031256_page_2.htm
Are private equity firms desirable?
In contemporary capitalism we can determine a striking contradiction. On the one hand our economy is dominated by giant multinationals, on the other hand we can distinguish small, activist shareholders that focus on big profits. Private equity firms are such profit-minded shareholders. But according to critics those profits aren't durable. They argue that those profits are the result of loading companies up with debts. The social utility and the economic desirableness of private equity firms depends in that way on whether better management and the increase of efficiency overshadows the "debt effect". But this isn't something new. Since the beginning capitalism is characterized by the struggle between personal greed and a collective effort in raising living standards.
Source: The private equity boom by Robert J. Samuelson
http://www.washingtonpost.com/wp-dyn/content/article/2007/03/14/AR2007031402177.html
The private equity boom: why now?
In the study of why the private equity boom has taken place on that moment, we have to notice that markets behave in a rational way to the price an regulatory signals they are given. A first important reason is that equity financing was very expensive because of the tech bust in the beginning of the decennium. An other reason can be find in the fact that on the moment of the boom, the corporate balance sheets and profits were very strong. Through here those companies were very attractive in the search for cash yield. We can conclude that on that particular moment everything seems to be perfect to create a boom in the private equity business.
Source: The private equity boom: causes and policy issues by A Blundell-Wignall -www.oecd.org/dataoecd/36/59/40973739.pdf
The private equity boom: were did they get there money from?
Big deals are announced regularly. Billions and billions are involved in buyouts all over the world. But where's that money coming from. Even the richest persons in the world couldn't get that amount of money together. We find the answer by the biggest and most powerful pension funds in the world. They are funding the boom in private equity. But why are pension funds interested in the private equity business? The answer is simple: the private equity returns are beating the returns in the public market, another reason why big private equity funds and big pension funds are drawn together is the dynamics of the industry. Because of the success more and more pension funds steps up their private-equity activity. This causes a snowball effect which can explain the private equity boom.
Source: The money behind the private equity boom by Steve Rosenbush
http://www.businessweek.com/print/investor/content/nov2006/pi20061107_031256.htm
In contemporary capitalism we can determine a striking contradiction. On the one hand our economy is dominated by giant multinationals, on the other hand we can distinguish small, activist shareholders that focus on big profits. Private equity firms are such profit-minded shareholders. But according to critics those profits aren't durable. They argue that those profits are the result of loading companies up with debts. The social utility and the economic desirableness of private equity firms depends in that way on whether better management and the increase of efficiency overshadows the "debt effect". But this isn't something new. Since the beginning capitalism is characterized by the struggle between personal greed and a collective effort in raising living standards.
Source: The private equity boom by Robert J. Samuelson
http://www.washingtonpost.com/wp-dyn/content/article/2007/03/14/AR2007031402177.html
The private equity boom: why now?
In the study of why the private equity boom has taken place on that moment, we have to notice that markets behave in a rational way to the price an regulatory signals they are given. A first important reason is that equity financing was very expensive because of the tech bust in the beginning of the decennium. An other reason can be find in the fact that on the moment of the boom, the corporate balance sheets and profits were very strong. Through here those companies were very attractive in the search for cash yield. We can conclude that on that particular moment everything seems to be perfect to create a boom in the private equity business.
Source: The private equity boom: causes and policy issues by A Blundell-Wignall -www.oecd.org/dataoecd/36/59/40973739.pdf
The private equity boom: were did they get there money from?
Big deals are announced regularly. Billions and billions are involved in buyouts all over the world. But where's that money coming from. Even the richest persons in the world couldn't get that amount of money together. We find the answer by the biggest and most powerful pension funds in the world. They are funding the boom in private equity. But why are pension funds interested in the private equity business? The answer is simple: the private equity returns are beating the returns in the public market, another reason why big private equity funds and big pension funds are drawn together is the dynamics of the industry. Because of the success more and more pension funds steps up their private-equity activity. This causes a snowball effect which can explain the private equity boom.
Source: The money behind the private equity boom by Steve Rosenbush
http://www.businessweek.com/print/investor/content/nov2006/pi20061107_031256.htm
China
's Notice 82.The People's Republic of China adopted a law, called Notice 82, which will change the position of offshore private equity firms who control enterprises in China. No.82 prescribes that non-Chinese firms will be considered PRC tax residents when their effective management is located in the PRC. The criteria the PRC imposes on these overseas incorporated domestically-controlled enterprises (OIDCE), also referred to as 'red chips', demand that the big private equity firms and international holdings who do not manage the day-to-day activities of their Chinese firms, do not collect payments of interest or dividends.
http://www.kpmg.com.cn/en/virtual_library/Tax/tax_alert/Taxalert0910.pdf
Big market opportunities
In the coming year the structure of the venture capital market will go through a makeover. The market has been locked up due to the lack of exit opportunities caused by low investment confidence. The past few quarters nobody on the market was keen on investing, especially with venture capital. In particular the private equity investors and the venture capitalists weren
't able to sell their investments. However, recent data have indicated that the confidence in the venture capital market is rising. This translates itself into rising interest in investments and it opens up a market with low prices and big opportunities.http://docs.google.com/viewer?a=v&q=cache:AfeLHIW3cIAJ:www.usfca.edu/sobam/nvc/pub/pdf/US_VC_Index_2008_Q2.pdf+vc+confidence&hl=en&sig=AHIEtbSf00m49gzgBGHaOAGjFrk30iJzAw
Investment downturn
Private equity firms are less keen on making investments and are sitting out this economic downturn. The 2009 first quarter report from PitchBook Data indicates that investment activity of private equity firms in general has fallen. Not only does the report say that the total amount of capital used in private equity deals dropped by 75% to $12.8 billion in the fourth quarter of 2008, it also says that the medium deal amount shrank by 60% to $25 million. Reason for this phenomenon is the instability of the economic market caused by the financial crisis.
http://privateequityblogger.com/2009/04/private-equity-2009-data.html
Connections between hedge funds and private equity?
Many people think that private equity firms and hedge funds are very related to each other and that they had the same reaction on this financial crisis. But that's not fully true. The last few years a connection is been created because both financial institutions formed an alliance or joint ownership structure in order to share information, but their core activities are still different from each other. Private equity firms invest in companies who are not publicly traded and with a majority of control, in order to make these companies more profitable and competitive on a longer term. Hedge funds only take a small minority and try to influence the stock markets to make some profits on the short term. The added value for private equity firms is only created after 5 to 10 years, so their influence on this crisis in still unknown and not relative because there actions on the longer term could be positive. But for hedge funds this is not the case, their actions have a negative effect on this crisis.
http://richard-wilson.blogspot.com/2007/08/hedge-funds-and-private-equity.html
Many people think that private equity firms and hedge funds are very related to each other and that they had the same reaction on this financial crisis. But that's not fully true. The last few years a connection is been created because both financial institutions formed an alliance or joint ownership structure in order to share information, but their core activities are still different from each other. Private equity firms invest in companies who are not publicly traded and with a majority of control, in order to make these companies more profitable and competitive on a longer term. Hedge funds only take a small minority and try to influence the stock markets to make some profits on the short term. The added value for private equity firms is only created after 5 to 10 years, so their influence on this crisis in still unknown and not relative because there actions on the longer term could be positive. But for hedge funds this is not the case, their actions have a negative effect on this crisis.
http://richard-wilson.blogspot.com/2007/08/hedge-funds-and-private-equity.html
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