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PRIVATE EQUITY: THE RISE & RISE OF


alonso
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I donÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t really know if there is cause for concern about the increasing number and size of

private equity deals. I do know that some investment choices are taken off the table, but

thatÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s probably a minor issue. Mainly I just have vague ideas and questions.

Here are a few of them:

1. The general idea of a private equity takeover, so they say, is to remove the target from

public listing, and therefore scrutiny and oversight, so as to be free to restructure and run

the business more efficiently.

But havenÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t we spent a couple of hundred years building up a body of corporate laws and

reporting/disclosure rules etc to make it a better market place? ItÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s not ideal by any

measure but does it make sense if this is increasingly thrown away? Should there be

continuing disclosure/reporting rules for public companies going private?

On the other hand, sometimes there are cases when, if this doesnÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t happen, a company

could fold.

2. We know that private equity deals typically involve huge amounts of debt, mainly

foreign debt. What economic effects does this have? Is it liquidated when and if the

companies are relisted? Is there or should there be a national interest issue?

3. WeÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢ve probably all had losses and gains out of takeovers. But is there a difference

between an old-fashioned scrip/part scrip for scrip deal and the present day take it or take

it cash deal?

 

What do you think?

 

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In reply to: alonso on Saturday 26/05/07 01:58pm

hi alonso

 

i'll have a crack.

 

1. disclosure is to ensure shareholders/market is informed. there are many well known privately owned companies that do not bear the cost and burden of public disclosure eg. Visy.

once private why disclose anything publicly? they should only report to their owners. private companies still have to meet corporate laws.

 

2. the debt levels are a level of risk the financial institutions take on so it is their risk to bear (and the company borrowing it). if someone borrows money to invest and makes a positive return it should be providing a positive economic return generally.

 

3. scrip or cash or scrip/cash has been going on since forever. given the current tax implications in australia, a scrip deal with roll over relief can be excellent value if you are trying to defer capital gains or want to maintain exposure to the target company.

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In reply to: wolverine on Saturday 26/05/07 06:23pm

Hey wolverine, thanks for your response

 

on debt: the $11b for qantas probaly won't be the last huge deal, this is a worldwide phenomenon as you know. Isn't there an issue about the implications for our interest rates and currency level? Maybe there's an economist out there who can shed some light on that.

 

on "maintain(ing) exposure to target company": that's one of my worries, you can't have exposure if its not there anymore to invest in. If Qantas had gone through and if you wanted to put some money in aust. airline industry, you're stuffed!

 

on disclosure: if you had (big if) Qantas, BHP & Woodside privatised, that's an awful lot of Aust industry not open for inspection. Or if you have 10 times that smaller top 200 companies privatised?

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  • 3 weeks later...

AFP Business News

 

http://au.biz.yahoo.com//070612/33/19ufs.html

Tuesday June 12, 7:44 PM

 

Private equity groups raised record funds in 2006: industry

 

Photo : FAFP

Private equity companies in Europe raised a record 112 billion euros (150 billion dollars) in 2006, an increase of 56.4 percent compared with 2005, industry association EVCA said Tuesday.

 

The figure represents a substantial upwards revision of a previous estimate of 89.8 billion euros, published by the European Private Equity and Venture Capital Association in March.

 

Of the total, 84 billion euros was used for buy-out operations and 17 billion euros for venture capital, EVCA said.

 

"Buyouts and in particular mega-buyouts are doing extremely well," said the chairman of EVCA and chief executive of Mercapital, Javier Loizaga, who stressed, however, that private equity was more commonly used to fund smaller businesses.

 

"Ninety percent of the companies financed by private equity employ fewer than 500 people," he said.

 

Private equity companies have grown into a formidable power in international financial markets and have launched numerous giant takeovers for established companies.

 

With their success has come controversy, however, and they are accused of destroying jobs and being a danger to the stability of the financial system.

 

They raise money from private investors and then invest the cash either in underperforming publically listed companies, which they take private, restructure and then re-sell, or in promising new businesses.

 

The United States was the biggest source of capital in 2006, supplying over a quarter, with British investors providing 21.3 percent and France 7.9 percent, the EVCA said.

 

Britain was the biggest destination of capital, with 33 percent of investments made in British companies. Britain was followed by France with 15.2 percent and Germany with 10.2 percent.

 

The data used by EVCA was supplied by financial data group Thomson Financial and accountancy firm PricewaterhouseCoopers.

 

 

 

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  • 2 weeks later...

Another perspective. It's as well to be tuned in to likely developments of whatever kind.

 

AFP Business News

http://au.biz.yahoo.com//070622/33/1abow.html

Saturday June 23, 4:07 AM

 

Private equity hostile to labor and should be regulated: union body

 

 

An international trade union body on Friday urged governments to clamp down on the activities of private equity funds, describing them as "shameless" and hostile to workers.

 

"Private equity is basically a business model that is antagonistic to labour," the International Trade Union Confederation (ITUC), which represents 168 million workers in 153 countries, charged in a report.

 

"The management culture of private equity and hedge funds is shameless in its effort to cut all possible costs," the report said, citing instances where companies taken over by private equity funds have eliminated thousands of jobs.

 

But it added that management by private equity also "includes pressure on wages, benefits and working conditions, refusal to engage in collective bargaining and outright harassment of workers who organise in trade unions."

 

Under such circumstances, the ITUC insisted, "political action can and must regulate this industry, halt its excesses and ensure that it only operates where it benefits average investors, workers and their societies."

 

With money raised on private markets, private equity funds invest in and take control of underperforming publically traded companies companies that they then restructure, often under new management, in order to make them more profitable -- and saleable.

 

The ITUC report said that after the Automobile Association, a British group offering services to stranded motorists, was taken over by the investment funds CVC and Permir in 2004, the workforce was reduced from 10,000 to 7,000.

 

Gate Gourmet, a caterer, saw its workforce cut back to 22,000 from 26,000 following its acqusition by Texas Pacific Group, according to the report.

 

The ITUC maintained that since private equity and hedge funds cannot be expected to discipline themselves, "only government regulation will be able to curb the externalities of these investment activities."

 

It said governments should:

 

-- enforce minimum financial reporting standards on the funds,

 

-- impose stricter taxation practices,

 

-- ensure that corporate governance preserve the long-term interests of companies under private equity regimes and

 

-- take steps to protect workers' rights to collective bargaining.

 

 

 

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  • 11 years later...

This is not a story about the "rise and rise" - rather a spectacular fall of a private equity firm, who at one point managed almost $14 billion of assets for investors like Bill & Melinda Gates Foundation and the retirement fund for teaches in the state of Texas

extract

Behind the Spectacular Collapse of a Private Equity Titan

Arif Naqvi rode DubaiÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s rise to build Abraaj Group with an unusual business model. Was it a house of cards?

 

July 30, 2018, 11:00 AM GMT+10

Days before rubbing elbows with global business titans in Davos in January, Arif Naqvi set out to charm another circle of friendsÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâہ¡ÃƒÆ’‚ÂÂGulf Arab tycoonsÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâہ¡ÃƒÆ’‚ÂÂin a last-ditch attempt to save his Dubai private equity firm.

 

But things were already on the cusp of spiraling out of control. Dogged by allegations Abraaj had mismanaged investorsÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢ money, DubaiÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s star financier soon couldnÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t pay the rent.

 

After Naqvi, 58, surrendered control of Abraaj in June, it was revealed that for years, its main revenues didnÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t cover operating costs. Abraaj borrowed to fill the gaps and now owes creditors over $1 billion. Once lenders turned off the taps, the firm collapsed, leaving losses, lawsuits and shattered reputations in its wake.

https://www.bloomberg.com/news/features/201...te-equity-titan

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  • 5 months later...
Pengana Capital is aiming for an Australian first with the launch of a $250 million-$1 billion retail fund investing in a globally diversified portfolio of private equity assets.

 

The fund aims to give retail investors an exposure to an asset class that his historically been accessed only by institutions and ultra high-net worth investors who have the large sums required to participate in private equity funds.

 

Pengana (PCG) noted that the Federal Governmentâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s Future Fund, with $149bn under management, had upped its exposure to private equity to 14.8 per cent or $2Bn from 11.8 per cent a year earlier.

 

The fund will be managed by Pengana but with Chicago-based Grosvenor Capital Management, L.P. selecting the investments for the trust and constructing the portfolio. GCM has in excess of US$52bn in assets under management in private equity, hedge fund strategies, infrastructure and real estate with commitments to more than 800 underlying funds

 

The initial public offering is slated to open on February 26 with a priority offer for investors in all of PCGâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢s funds as well as shareholders in the listed investment company Pengana International Equities Limited, Pengana Capital Group and its major shareholders Washington H. Soul Pattinson.

 

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“We believe private equity markets offer compelling investment opportunities and such investments should play a role in many investorsâââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’¢Ã¢Ã¢â€š¬Ã…¾Ãƒâ€šÃ‚¢ portfolios,âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ Jon Levin, President of GCM, said.

 

âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“Private equity investments benefit from the lack of short term public pressure, are less dependent on the market cycle and have historically often generated superior returns to their listed equivalents.âââہ¡Ãƒâ€šÃ‚¬ÃƒÆ’‚ÂÂ

 

Private equity assets have typically been avoided by small investors because of the lack of liquidity, with large investments locked up for a number of years until they are sold and an investment profit realised.

 

Pengana will pay all of the costs associated with the offer and issue alignment shares to the trust that will lift the value of the shares from the $1.25 offer price to $1.315. Those shares will be distributed to investors after two years.

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  • 2 years later...

NAOS Asset Management is raising $35 million to invest in seven to ten unlisted businesses, as it sees opportunities in the smaller end of ASX listed companies dry up.

 

The Private Opportunities Fund wants to find companies that are profitable, founder led and not yet listed.

 

NAOS is eyeing businesses with a valuation typically between $20 million to $70 million, and annual revenue of $5 million or more. It plans to stay away from miners, metals, casinos and other similar businesses that do not meet its ESG requirements.

 

The strategy of investing in unlisted companies is a departure from the NAOS current lineup, which invests primarily in listed equities.

 

NAOS managing director Sebastian Evans said the firm has already identified investment opportunities for the new fund, including a coffee wholesale retailer.

the opportunity set in this sector is great. There are almost 50,000 private businesses with turnover in the $2 million to $10 million range whilst there are only 375 listed companies in the $5 million to $100 million turnover range, Evans said.

 

The market is witnessing a trend of quality private companies choosing to stay private for longer and we want to take full advantage of this movement, he said.

NAOS plans to use five avenues of finding potential unlisted investments: its current network, its advisory board, professional service providers like lawyers and accountants, cold calling business owners identified via industry awards or events, and even just simply looking into the brands or products that people are talking about.

 

Some of these businesses need capital to grow, but do not want to list and are too small for VC [venture capital]...sometimes, coldcalling resonates the most if you make $5 million a year, he said.

The fund is closed ended with a five year term. It can go up to 20 unlisted investments, but Evans expects the number to sit between seven and 10.

 

NAOS has not appointed brokers for the raise. Its three LICs invest about $400 million for 8000 investors, whom it plans to tap in raising for the new fund.

 

(( I have heard they are looking for 300 investors, at $100k a pop ))

 

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