Monday, September 23, 2013

A Deal for BlackBerry That's Not Yet a Deal -

It is quite unusual to announce any acquisition like this, let alone without financing. Most targets would require a commitment letter from banks that make financing more certain. Absent that, the target’s board would ask for at least a letter from the banks that states that the buyers were “highly confident” that financing would be obtained. These letters, invented by Michael Milken back in the 1980s for Drexel Burnham Lambert, are the realm of bidders who are unsure about financing. But at least the banks give some level of commitment in a highly confident level even if they can later back out.

A Deal for BlackBerry That's Not Yet a Deal -

Tuesday, September 17, 2013

Leveraged buyout groups refinance record debt -

“All the businesses that lent themselves to be refinanced have been refinanced given the unprecedented market conditions driven by QE,” Matteo Canonaco, head of Financial Sponsors coverage at HSBC, said. “The market has grown addicted to QE and is watching closely the moves of the Fed as any form of exit takes us into uncharted territory.”
Private equity groups have sought to reassure investors they have put protections in place. Carlyle has about 60 per cent of its US companies’ debt and about three quarters of its European portfolio’s debt “at fixed rates or hedged”, co-founder Bill Conway said in July. New York-based rival KKR has about 87 per cent of its portfolio “either fixed or swapped to fixed” rates, Scott Nuttall, KKR’s head of capital and asset management, said that same month.

Leveraged buyout groups refinance record debt -

Wednesday, September 11, 2013

Shadow Capital

"Take, for example, the recent deal news from Canada, the Saudi Arabia of institutional direct-investment capital, which saw two public entities partner to acquire a business via their direct-investment programs. OMERS Private Equity (affiliated with the Ontario Municipal Employees’ Retirement System) and Alberta Investment Management Corp. will buy the European theater chain Vue Entertainment for C$1.5 billion. The money comes directly from the balance sheets of public pensions and endowments. If we assume that about $500 million in equity is going into this deal, it’s $500 million that in an earlier era would have gone through a fund and been counted in fundraising statistics."

Shadow Capital - Privcap

Friday, September 6, 2013

The death of private equity's fee hogs ...

For years, private equity firms have skimmed money from their portfolio companies, under the guise of "just trying to help." Now there is reason to believe this practice is coming to an end. Not because it's offensive, but because private equity firms are no longer reaping most of the rewards.
The fees I'm talking about here are "monitoring fees," in which an acquired company pays its private equity owners an annual sum for ongoing management and advisory services. You might have heard about these recently in the context of troubled casino company Caesar's Entertainment (CZR), which each year pays nearly $30 million to its private equity owners -- Apollo Global Management (APO) and TPG Capital -- despite annual losses north of $1.4 billion (Caesar's could have killed the arrangement during last year's IPO, but it would have been forced to pay $195 million the privilege).
Read more at Fortune, The death of private equity's fee hogs - The Term Sheet: Fortune's deals blogTerm Sheet

Monday, September 2, 2013

McKinsey & Co. Isn't All Roses....

Frankly, in my opinion, consultants, advisers, accountants and attorneys get a bad rap. If I hire an adviser, for what's considered a fairness opinion, I've essentially asked a third party to provide me their opinion on a particular subject. Technically, there shouldn't be a correct answer or result.

Business is subjective. My opinion plus yours multiplied by some backward looking factor should equal zero. Why? Our opinions are of minuscule value. However, hiring a consultant provides a company with an arms-length set of eyes. Unfortunately, some consultants aim to please the intoxicated client, and that's where Enron can happen...

"It told AT&T in 1980 that it expected the market for cellphones in the United States in 2000 would amount to only 900,000 subscribers. It turned out to be 109 million. The list goes on..."

Read more ....

In a New Book, McKinsey & Co. Isn't All Roses -

Sunday, September 1, 2013

Linearity - There's No Such Thing As a Sure Thing

Great article about linearity.

Business plans, deal books and investment decks will not ensure success in a fund raise or acquisition. The main variables include timing and fit. Timing is due to the whims of market temperament. Fit has to do with fitting your idea with the right counter party.

The paths are always different, but the finish line is the same...

Scripting News: Linearity