Co-Investment Overview
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Combining Banking with Private Equity Investing*
Unstable Equity? * Combining Banking with Private Equity Investing First draft: April 14, 2010 This draft: July 30, 2010 Lily Fang INSEAD Victoria Ivashina Harvard University and NBER Josh Lerner Harvard University and NBER Theoretical work suggests that banks can be driven by market mispricing to undertake activity in a highly cyclical manner, accelerating activity during periods when securities can be readily sold to other parties. While financial economists have largely focused on bank lending, banks are active in a variety of arenas, with proprietary trading and investing being particularly controversial. We focus on the role of banks in the private equity market. We show that bank- affiliated private equity groups accounted for a significant share of the private equity activity and the bank’s own capital. We find that banks’ share of activity increases sharply during peaks of the private equity cycles. Deals done by bank-affiliated groups are financed at significantly better terms than other deals when the parent bank is part of the lending syndicate, especially during market peaks. While bank-affiliated investments generally involve targets with better ex-ante characteristics, bank-affiliated investments have slightly worse outcomes than non-affiliated investments. Also consistent with theory, the cyclicality of banks’ engagement in private equity and favorable financing terms are negatively correlated with the amount of capital that banks commit to funding of any particular transaction. * An earlier version of this manuscript was circulated under the title “An Unfair Advantage? Combining Banking with Private Equity Investing.” We thank Anna Kovner, Anthony Saunders, Antoinette Schoar, Morten Sorensen, Per Strömberg, Greg Udell and seminar audiences at Boston University, INSEAD, Maastricht University, Tilburg University, University of Mannheim and Wharton for helpful comments. -
Private Equity;
MICHAEL MORTELL Senior Managing Director Digital Media; Mergers & Acquisitions; Private Equity; Restructuring; Strategy 485 Lexington Avenue, 10th Michael Mortell is a Senior Managing Director at Ankura Capital Advisors, Floor New York, NY 10017 based in New York. Mike has extensive experience advising entrepreneurs +1.212.818.1555 Main and companies on mergers, acquisitions, strategic and business planning, +1.646.291.8597 Direct restructuring, and capital raising alternatives. Over a career in investment banking and consulting, he has cultivated expertise in the digital media and [email protected] private equity industries and developed strong relationships within them. Mike has a proven record of identifying young, high-potential companies, and providing the strategical and tactical counsel that supports growth EDUCATION objectives and positions them for future success. He also has advised MBA, University or Chicago owners/shareholders of established companies on strategic growth and Booth School of Business liquidity options. In addition to his work in digital media, he has significant BS, Finance Fairfield University experience in the e-commerce, software, retail, specialty manufacturing, and business services sectors. Prior to joining Ankura, Mike was a senior advisor at GP Bullhound, a CERTIFICATIONS boutique investment bank that acquired AdMedia Partners, the M&A FINRA Series 24, 7, 79 and 63 advisory firm where he served as a managing director. He previously ran the Private Equity Financing Group of Prudential Securities and worked for Zolfo, Cooper and Company where he was a consultant to troubled companies and their creditors. Mike also co-founded and managed Grandwood Capital LLC, an investment bank and advisory firm focused on middle-market companies. -
Valuation Methodologies V4 WST
® ST Providing financial training to Wall Street WALL www.wallst-training.com TRAINING CORPORATE VALUATION METHODOLOGIES “What is the business worth?” Although a simple question, determining the value of any business in today’s economy requires a sophisticated understanding of financial analysis as well as sound judgment from market and in dustry experience. The answer can differ among buyers and depends on several factors such as one’s assumptions regarding the growth and profitability prospects of the business, one’s assessment of future market conditions, one’s appetite for assuming risk (or discount rate on expected future cash flows) and what unique synergies may be brought to the business post-transaction. The purpose of this article is to provide an overview of the basic valuation techniques used by financial analysts to answer the question in the context of a merger or acquisition. Basic Valuation Methodologies In determining value, there are several basic analytical tools that are commonly used by financial analysts. These methods have been developed over several years of research and refinement and are based on financial theory and market reality. However, these tools are just that – tools – and should not be viewed as final judgment, but rather, as a starting point to determining value. It is also important to note that different people will have different ideas on value of an entity depending on factors such as: u Public status of the seller and buyer u Nature of potential buyers (strategic vs. financial) u Nature of the deal (“beauty contest” or privately negotiated) u Market conditions (bull or bear market, industry specific issues) u Tax position of buyer and seller Each methodology is fairly simple in theory but can become extremely complex. -
August Investor Presentation
APOLLO GLOBAL MANAGEMENT, LLC (NYSE: APO) Apollo Global Management Investor Presentation August 2018 Forward Looking Statements & Other Important Disclosures This presentation may contain forward-looking statements that are within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include, but are not limited to, discussions related to Apollo Global Management, LLC’s (together with its subsidiaries, “Apollo”,”we”,”us”,”our” and the “Company”) expectations regarding the performance of its business, liquidity and capital resources and the other non-historical statements. These forward looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. When used in this presentation, the words “believe,” “anticipate,” “estimate,” “expect,” “intend” or future or conditional verbs, such as “will,” “should,” “could,” or “may,” and variations of such words or similar expressions are intended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. These statements are subject to certain risks, uncertainties and assumptions, including risks relating to our dependence on certain key personnel, our ability to raise new private equity, credit or real asset funds, market conditions generally, our ability to manage our growth, fund performance, changes in our regulatory environment and tax status, the variability of our revenues, net income and cash flow, our use of leverage to finance our businesses and investments by funds we manage (“Apollo Funds”) and litigation risks, among others. -
Preqin Special Report: Subscription Credit Facilities
PREQIN June 2019 SPECIAL REPORT: SUBSCRIPTION CREDIT FACILITIES PREQIN SPECIAL REPORT; SUBSCRIPTION CREDIT FACILITIES Contents 3 CEO’s Foreword 4 Subscription Credit Facility Usage in Private Capital 7 Subscription Lines of Credit and LP-GP Alignment: ILPA’s Recommendations - ILPA 8 Are Subscription Facilities Oversubscribed? - Fitch Ratings 10 Subscription Finance Market - McGuireWoods LLP Download the Data Pack All of the data presented in this report is available to download in Excel format: www.preqin.com/SCF19 As with all our reports, we welcome any feedback you may have. To get in touch, please email us at: [email protected] 2 CEO's Foreword Subscription credit facilities: angels or demons? A legitimate and valuable tool for managing liquidity and streamlining transactions in a competitive market, or a cynical ploy for massaging IRRs? The debate continues in private equity and wider private capital circles. As is often the case, historical perspective is helpful. Private capital operates in a dynamic and competitive environment, as GPs and LPs strive to achieve superior net returns, through good times and bad. Completing deals and generating the positive returns that LPs Mark O’Hare expect has never been more challenging than it is CEO, Preqin today, given the availability of capital and the appetite for attractive assets in the market. Innovation and answers: transparent data, combined with thoughtful dynamism have long been an integral aspect of the communication and debate. private capital industry’s arsenal of tools, comprised of alignment of interest; close attention to operational Preqin’s raison d’être is to support and serve the excellence and value add; over-allocation in order to alternative assets industry with the best available data. -
Beyond COVID-19 PE Playbook
Beyond COVID-19 PE Playbook TRANSACTIONAL POWERHOUSE 2 Beyond COVID-19 PE Playbook Contents Distressed M&A 03 PIPEs / Minority investments 07 Public-to-Privates (P2Ps) 12 Valuation bridge tools 15 M&A: The new normal 21 Debt buybacks 24 3 Beyond COVID-19 PE Playbook 1 Distressed M&A 4 Beyond COVID-19 PE Playbook Distressed M&A Any downturn tends to produce a surge of distressed M&A opportunities, and the current crisis will be no different. Investments in distressed companies follow a different set of rules to “normal” M&A transactions, bringing additional complexity in terms of the stakeholders involved and deal structuring, as well as a particular set of challenges for due diligence and buyer protections. Structuring considerations • Loan-to-own strategies: Credit funds are well-versed with taking positions in capital • A complex cast: Restructurings often entail structures as part of a loan-to-own strategy a broad range of protagonists - the equity, or otherwise. Even where their fund terms senior debt, junior debt, bilateral country debt permit investment into debt or mezzanine providers, trade creditors, unions, government(s) securities, many buyout funds have stayed clear and management. Understanding early on of such structuring. As we enter a period of where the value breaks, who is driving the deal, greater financial strain on business, PE should conflicts of interest, and who can spoil a deal, remain open-minded and creative about more are critical. Where distressed funds are involved, structured deals to achieve control, e.g. around be aware that their tactics and strategies can distressed add-on targets. -
LIFE at KKR We Are Investors
LIFE AT KKR We are investors. But we're more than that. IT'S IN OUR DNA We're collaborative team players who are curious communities. We often measure success over about the world around us. We're passionate about years, not quarters. We value integrity in all that we always learning more and pushing to be better. do, whether it's presenting numbers accurately or Here, we're never finished growing or discovering being open and honest with a portfolio company new ideas. executive. People want to do business with those they like and trust. It's a mantra instilled in all of us People want to do business from the top down. with those they like and trust As a firm we manage investments across multiple asset classes and as individuals we are encouraged to think creatively to solve problems, explore opportunities, take on new responsibilities and challenges, put our clients first and contribute to our LIFE AT KKR | 2 We are investors. But we're more than that. Culture & Work Environment For over 40 years, our At KKR, you'll find a team of curious, driven, dedicated and intelligent professionals who enjoy working together. We all work collaborative approach hard to create a friendly environment that encourages asking continues to drive our culture questions and reaching out to others. Teamwork Entrepreneurial Spirit Integrity No matter where you sit in the Some of our best ideas come from It's at the heart of everything we do organization, you have the full giving people the time to explore, from our internal interactions to resources, network, skills and research and have conversations. -
Walker Report
WALKER REPORT NOVEMBER 2018 Our Support of the Walker Report Over the past several years, Kohlberg Kravis Roberts & Co. L.P. Overview of KKR and our private equity business (together with its affiliates, “KKR,” “we” or “us”) has been KKR is a leading global investment firm that manages multiple working to increase the transparency of our investment activities alternative asset classes, including private equity, energy, and processes, both through formal compliance with guidelines infrastructure, real estate and credit, with strategic partners recommending increased levels of disclosure as well as through that manage hedge funds. KKR aims to generate attractive voluntary initiatives with our clients, partners, portfolio investment returns for its fund investors by following a patient companies and the public at large. and disciplined investment approach, employing world-class In November 2007, a working group formed by The British people, and driving growth and value creation with KKR portfolio Private Equity and Venture Capital Association (“BVCA”) and companies. KKR invests its own capital alongside the capital it led by Sir David Walker issued the Guidelines for Disclosure manages for fund investors and provides financing solutions and Transparency in Private Equity. That publication, which is and investment opportunities through its capital markets also known as the “Walker Report,” makes specific business. References to KKR’s investments may include the recommendations for improving the level of public disclosure activities of its sponsored funds. For additional information by private equity firms operating in the United Kingdom. about KKR & Co. Inc. (NYSE: KKR), please visit KKR’s website at www.kkr.com and on Twitter @KKR_Co. -
Private Equity Buyouts in Healthcare: Who Wins, Who Loses? Eileen Appelbaum and Rosemary Batt Working Paper No
Private Equity Buyouts in Healthcare: Who Wins, Who Loses? Eileen Appelbaum* and Rosemary Batt† Working Paper No. 118 March 15, 2020 ABSTRACT Private equity firms have become major players in the healthcare industry. How has this happened and what are the results? What is private equity’s ‘value proposition’ to the industry and to the American people -- at a time when healthcare is under constant pressure to cut costs and prices? How can PE firms use their classic leveraged buyout model to ‘save healthcare’ while delivering ‘outsized returns’ to investors? In this paper, we bring together a wide range of sources and empirical evidence to answer these questions. Given the complexity of the sector, we focus on four segments where private equity firms have been particularly active: hospitals, outpatient care (urgent care and ambulatory surgery centers), physician staffing and emergency * Co-Director and Senior Economist, Center for Economic and Policy Research. [email protected] † Alice H. Cook Professor of Women and Work, HR Studies and Intl. & Comparative Labor ILR School, Cornell University. [email protected]. We thank Andrea Beaty, Aimee La France, and Kellie Franzblau for able research assistance. room services (surprise medical billing), and revenue cycle management (medical debt collecting). In each of these segments, private equity has taken the lead in consolidating small providers, loading them with debt, and rolling them up into large powerhouses with substantial market power before exiting with handsome returns. https://doi.org/10.36687/inetwp118 JEL Codes: I11 G23 G34 Keywords: Private Equity, Leveraged Buyouts, health care industry, financial engineering, surprise medical billing revenue cycle management, urgent care, ambulatory care. -
Capital Formation Market Trends: Ipos and Follow-On Offerings
Professional Perspective Capital Formation Market Trends: IPOs and Follow-On Offerings Anna Pinedo and Carlos Juarez, Mayer Brown LLP Reproduced with permission. Published February 2020. Copyright © 2020 The Bureau of National Affairs, Inc. 800.372.1033. For further use, please visit: http://bna.com/copyright-permission-request/ Capital Formation Market Trends: IPOs and Follow-On Offerings Contributed by Anna Pinedo and Carlos Juarez, Mayer Brown LLP The capital formation environment has significantly changed in the last two decades and, in particular, following the global financial crisis of 2008. The number of initial public offerings has declined, and M&A exits have become a more attractive option for many promising companies. This article reviews trends in the initial public offering market, notable alternatives to IPOs, and follow-on offering activity. A Changing Environment While completing an IPO used to be seen as a principal objective of and signifier of success for entrepreneurs—and the venture capital and other institutional investors who financed emerging companies—this is no longer the case. Market structure and regulatory developments have changed capital-raising dynamics following the dot-com bust and financial crisis. At the same time, private capital alternatives also have become more varied and more significant. The number of IPOs drastically declined after 2000 compared to prior historic levels. After a brief increase in the number of IPOs following the aftermath of the dotcom bust, the number of IPOs declined again, partly as a result of the financial crisis. Changes in the regulation of research, enhanced corporate governance requirements, decimalization, a decline in the liquidity of small and mid-cap stocks, and other developments have been identified as contributing to the decline in the number of IPOs. -
Unpacking Private Equity Characteristics and Implications by Asset Class
Unpacking Private Equity Characteristics and Implications by Asset Class www.mccombiegroup.com | +1 (786) 664-8340 Unpacking Private Equity: Characteristics & implications by asset class The term private equity is often treated as a catchall, used interchangeably to describe a broad variety of investments. Such loose use of the phrase fails to capture the range of nuanced business ownership strategies it refers to and risks branding an entire asset class with characteristics and implications that are typically relevant to only a particular sub-category. Recently, this has especially been the case given the outsized global attention placed on the leveraged buyout deals of Bain Capital, a private equity firm founded by Republican U.S. presidential candidate Mitt Romney. In this context, popular discourse has inappropriately attached the label of private equity to a general practice of debt-fueled corporate takeovers that disproportionately focus on cost cutting. In reality, however, private equity refers to an array of investment strategies each with a unique risk-return profile and differing core skillsets for success. This article is intended to help family office executives better understand the nuances of the various sub-categories of private equity. It seeks to draw high-level distinctions, serving as a practical guide for investors entering the private equity arena, be it directly or through a more curated fund structure. Ultimately by understanding the characteristics and implications of each asset class, the reader should be equipped to make an educated choice regarding the most relevant and appropriate strategy for their unique profile. From a technical perspective, private equity is nothing more than making investments into illiquid non-publicly traded companies— i.e. -
Private Equity Primer
MEKETA INVESTMENT GROUP PRIVATE EQUITY PRIMER OVERVIEW This primer describes the asset class commonly known as Private Equity. It attempts to answer the types of questions Trustees would be likely to ask when considering an investment in this area. Historically, private equity investments have often been grouped in a larger category of investments called alternative investments. Alternative investments were defined to be any investments other than publicly traded stocks and bonds. In addition to private equity investments, alternatives often included real estate, hedge funds, portfolio insurance schemes, trading and arbitrage programs, long/short portfolios, and various derivative-based programs. This primer is limited to private equity investments, which Meketa Investment Group defines to be investments in companies that are privately owned. Further, this primer only describes the characteristics of the asset class itself. It does not suggest a target allocation to the asset class, nor does it specify how to implement an investment program in private equities. These issues are client specific and must be addressed by the decision-makers in each group. WHAT IS PRIVATE EQUITY? Private equity investments are simply investments in privately held companies. Private equity investments are generally structured in the form of partnerships that usually consist of ten to twenty equity investments in individual companies. Like investments in publicly traded common stocks, investments in private equity funds provide long-term investors with stakes in generative assets (i.e., equity positions). However, unlike publicly traded stocks, private equity funds are not priced daily by a market. Thus, the apparent price volatility is lower and the interim return correlation to public equities is subdued.