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Posts Tagged ‘private equity’

Value in private equity? Truth v reality

In Private Equity on 25/06/2010 at 5:26 am

Private equity firms, where corporate takeovers are planned and plotted, today sit atop an estimated $500 billion. But the deal makers are desperate to find deals worth doing, and the clock is ticking.

Supposedly, Corporate buyout specialists generally raise money from big investors and then buy undervalued or underappreciated companies. Whatever the truth of the last sentence, To maximize investment returns, they typically leverage their cash with loans from banks or bond investors.

Private equity funds generally tie up investors’ money for 10 years. But they typically must invest all the money within the first three to five years of the funds’ life. For giant buyout funds raised in 2006 and 2007, at the height of the bubble, time is short. They must invest their money soon or return it to clients — presumably along with some of the management fees the firms have already collected. Some of the industry’s biggest players, like David M. Rubenstein of the Carlyle Group, Henry Kravis of Kohlberg Kravis Roberts and David Bonderman of TPG, have more than $10 billion apiece in uncommitted capital — what is known as “dry powder” — according to Preqin, an industry research firm.

Some buyout firms are asking their clients for more time to search for companies to buy. Many more are rushing to invest their cash as quickly as possible, whatever the price.

Many in the industry are getting caught in bidding wars. Firms are assigning surprisingly high valuations to companies they are acquiring, even though the lofty prices will in all likelihood reduce profits for their investors. A big drop in returns would be particularly vexing for pension funds, which are counting on private equity, hedge funds and other so-called alternative investments to help them meet their mounting liabilities.

Full story from NYT.

SGX: Private equity to the rescue?

In Uncategorized on 04/05/2010 at 5:16 am

Last week tuesday, we reported SGX’s boast that MNCs wanted to list here.

SGX had also (FT reported) said that it was also expecting a flow of listing applications for Asian companies controlled by western private equity firms.

“We are getting more inquiries all the time,” he said. “Many of the private equity firms . . . need to find an exit. It has been three or four years since many of these investments, so now is a logical time for them [to come to the market] … Singapore had identified “a strong pipeline” of potential initial public offerings from China.

Add to that, the Special Purpose Acquisition Companies’ (SPACS’) IPOs that SGX wants to attract here, and one reasonably suspect that private equity is being looked upon as SGX’s saviour from the mediocrity of a second class exchange http://atans1.wordpress.com/2010/03/10/obvious-why-the-pru-chose-hkex-over-sgx-bt/

A special purpose acquisition company (SPAC) is an investment vehicle that allows  investors to invest in private equity type transactions via a listed vehicle. SPACs have no operations but are listed with the intention of merging with or acquiring a company with the proceeds of the SPAC’s IPO. http://atans1.wordpress.com/2010/04/08/endangered-in-us-coming-to-sgx/

Note in the US, SPACs have been used to buy Chinese and Indian businesses, allowing them to get listed in the US.

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