Posts Tagged “venture capital”

SuperInvestor 2010 - A full news roundup

November 19, 2020

As Superinvestor 2010 comes to a close in Paris for another year, we would like to thank all the delegates, speakers and sponsors for making the conference a very successful and hugely enjoyable event.

In addition to the coverage of the event,  we’ve gathered the leading articles and commentary from the business news websites to give you a comprehensive review of big industry issues tackled this year.

A Twitter round up:

@Super_Investor‎: Steve Schwarzman dropped into Paris SuperInvestor.. Has uncertainty affected him too?

@Super_Investor‎: Stuart Gent: Scenario-driven views, a strategy for translating a downturn into growth + good teams are needed for portfolio co growth #SI10

@Super_Investor‎: Systemic risk reduction, investor protection, inc transparency from EC Directive. Inc Transparency good for pe - Richard Wilson #SI10

@Super_Investor‎: Stop chasing ghosts and accept reality of today’s more traditional private equity industry - Guy Hands #SI10

@eFinancialNews‎: #GuyHands: ‘We would have looked like geniuses’ without #EMI http://bit.ly/99sd1r #SI10 #Paris

@Super_Investor‎: Great buzz at the speed LP/GP networking again. 3 more great sessions before reception at the fabulous Hotel Crillon #SI10

@Super_Investor‎: Ogeday Karahan of Eurasia Capital Partners won the 90-second pitch competition at SuperInvestor on Tuesday. Congrats! #SI10

@Super_Investor: The high yield maket is on fire - Tom Atwood #SI10

@PE_Fanatic‎: RT @Super_Investor: More pass the parcel deals needed in PE, GPs selling to other GPs - Guy Hands #SI10

@Super_Investor‎: Euro is a dog’s breakfast and a disaster waiting to happen. Greece Ireland and Portugal will leave - Roger Bootle #SI10

@Super_Investor‎: A manager resembling a “scar-faced warrior” is what’s needed to manage portfolio companies in a downturn ac to Jan Stahlberg of EQT #SI10

@SuperReturn‎: Roger Bootle is the only man more bearish than me - Tom Attwood #SI10

@Super_Investor: Euro is a dog’s breakfast and a disaster waiting to happen. Greece Ireland and Portugal will leave - Roger Bootle #SI10.

‎@PE_Fanatic‎: RT @SuperReturnKate: 2012-2016 will be new golden age of private equity according to Michael Queen, 3i speaking at SuperInvestor #SI10

@SuperReturn: Packed lunchroom, great buzz, hard to break up conversations to start the pm. #SI10

@Super_Investor‎: More pass the parcel deals needed in PE, GPs selling to other GPs - Guy Hands #SI10

@Super_Investor‎: A good manager is one who is “complying with the rules”, ac to Didier Millerot #SI10

@SuperReturnKate: Overhang will be burnt off in next 12 - 18 months. Michael Queen of 3i speaking at SuperInvestor #SI10

@SuperReturnKate: SuperInvestor is kicking off in Paris. Record attendance! #SI10.

‎@SuperReturnKate: SuperInvestor is kicking off in Paris. Record attendance! #SI10.

‎@SuperReturn‎: Developed world has been on a 13 year course of disinflation says Roger Bootle #SI10.

@SuperReturnKate: Roger Bootle expects america to eventually put in protectionist measures. Speaking at SuperInvestor in Paris #SI10.

@Super_Investor: UK heading for a tough couple of years ac to Roger Bootle #SI10

@Super_Investor: Hunger and humilty in combination make the best managers ac to Stuart Gent #SI10.

@SuperReturn‎: No change in interest rates anywhere in the foreseeable future in the west says Roger Bootle #SI10

@Super_Investor‎: Too many people, too much capital and too high return expectations in private equity at the moment - Guy Hands at SuperInvestor #SI10

@SuperReturn‎: Governance to drive LP activism: SuperInvestor 2010 article by Kalpana Fitzpatrick

@SuperReturnKate‎: America is the only producer of something the chinese want to buy a lot of - dollars. Roger Bootle at SuperInvestor in Paris #SI10

@Super_Investor‎: The high yield maket is on fire - Tom Atwood #SI10

@Super_Investor‎: Availabilty of bank debt will go down not up - Tom Atwood, ICG #SI10

@Super_Investor‎: Recovery will be “bath-shaped” or L shaped according to Roger Bootle #SI10

@Super_Investor‎: Weak Western economies and recent bubble explained by Asian surplus and China currency policy, sucking Western jobs- Roger Bootle #SI10

@SuperReturn: Next big challenge is exit overhang. Michael Queen speaking at SuperInvestor, Paris #SI10.

@Super_Investor‎: Hunger and humilty in combination make the best managers ac to Stuart Gent #SI10

@Super_Investor‎: Chris Masterson: Leverage in a portfolio co creates a dangerous war situation that management need to realise

@Super_Investor‎: Jan Stahlberg: Mezzanine guys sometimes come with a gun or a bomb hidden beneath their coat #SI10

@Super_Investor‎: Wim Borgdorff of Alpinvest and Dominique Senequier of Axa both agree that style drift is a major source of trouble for the industry SI10#

@Super_Investor‎: The best thing for the private equity industry is for banks to continue to make money, acc to Sanjay Patel of Apollo #SI10

Press coverage

Bloomberg - Buyout Firms Vying for Targets Increase Prices, May Lower Profits, 3i Says

Leveraged buyout firms are driving prices for potential targets to “extraordinarily” high levels in Europe as they vie to spend unused funds, 3i Group Plc Chief Executive Officer Michael Queen said.

Firms are paying 10 to 13 times companies’ earnings before interest, tax depreciation and amortization, more than during the buyout boom of 2006 and 2007, Queen told the SuperInvestor conference in paris today. Firms may struggle to profit from those deals, said Sanjay Patel, head of international private equity at Apollo Management International LLP. (More here)

eFinancialNews - A happy marriage: the key to happy returns

Senior buyout executives have highlighted the importance of having a happy marriage to succeed as a company manager. Discussing portfolio company management at the SuperInvestor conference in Paris this morning, buyout veteran and better Capital chairman Jon Moulton said firms should watch out for an unlikely threat to their investments - marital problems, which he said could lead management to crack under pressure. (More here)

eFinancialNews - 3i chief says industry has ’spectacularly failed’ to fulfil aim

Michael Queen, 3i Group’s chief executive, has said the buyout industry has “spectacularly failed” to fulfil its aim of investing through the downturn. Speaking at the Super Investor conference in Paris today, the FTSE 1oo company head said the buyout industry’s investment strategy was to under-invest at the top of market and over-invest at the bottom, but that the industry had “spectacularly failed to put that into practice”. (More here)

Financial Times - Enough to make your teeth ache

The biggest laugh of an otherwise subdued private equity get-together in Paris this week came when Guy Hands told a packed room what he did after losing a multibillion dollar lawsuit against Citigroup over his ill-fated buy-out of EMI.

Appearing in front of an audience at the SuperInvestor conference, the Terra Firma boss told how he had flown back to his tax-exile home in Guernsey on a Sunday night, after a grueling three weeks in a New York courtroom. (More here)

Reuters - Buyout industry to grow after painful squeeze-conference

The private equity industry will grow in the long term and big firms will get bigger as long-standing investors keep increasing their allocations and new investors enter the asset class, industry insiders said. But the buy-outs business could be in for a painful contraction in the short term as newer and more opportunistic investors, such as insurers, banks and hedge funds, attracted by the bumper returns being produced by the industry, pull back their money.

“I think it’s inevitable the private equity market will grow,” David Roux, co-founder and co-chief executive of Silver Lake told the SuperInvestor private equity conference in Paris. (More here)

Reuters - New Moulton vehicle to list before Christmas

Better Capital, the new venture from Jon Moulton is planning to raise over 100 million pounds for turnaround investments and is due to list in London before Christmas, Moulton said. Following an acrimonious split with former colleagues at Alchemy Partners in September, the private-equity industry veteran has been sounding out investors and hiring staff for a new investment vehicle.

Speaking to reuters on the sidelines of the SuperInvestor conference in Paris, moulton said Better Capital had appraoched a few traditional private equity investors, as well as equities investors and wealth managers, and had received sufficient interest  to push ahead with the plans. (More here)

Reuters - Private equity firms mull future as asset managers

Private equity firms will need to become more like asset managers, offering buyouts as just part of their portfolio, or else focus tightly on specific sectors in order to prosper, industry participants said.

“Our view is that the future will be dominated by multi-asset class models or very focused models,” Baillie told the SuperInvestor conference in Paris on Wednesday. (More here)

Telegraph - Terra Firma founder Guy Hands speaks out on EMI deal

Guy Hands, the founder of Terra Firma, has said his private equity group would have “looked like geniuses” had it not bought EMI Group.

Mr Hands’ comments came at the SuperInvestor conference in Paris, in what was his first public speech since losing a high-profile court battle against Citigroup over the music company’s purchase. (More here)

Post Under: General

Highlights from SuperReturn Asia 2010

November 3, 2020

SuperReturn Asia 2010 was a huge success with over 200 LPs in attendance and 4 days of unrivalled networking with a total of 750 attendees all under one roof. The in-depth discussion content and new facilitated networking formats were widely praised as unique to any Asian private equity event and made for an exceptionally dynamic conference experience. This video looks back at the highlights of the event held in Hong Kong.

Post Under: Asia

Mission Impossible? Managing Risk in Private Equity Portfolios

October 5, 2020

Josh Lerner, Harvard Business School, will speak at SuperReturn Middle East, 18 - 20 October 2020

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Josh Lerner, Jacob H Schiff Professor of Investment Banking, Harvard Business School, will be presenting new research at the SuperReturn Middle East conference in Abu Dhabi (18 - 20 October 2020) on risk management.

This talk will grapple with what is in many respects the most challenging questions in private equity today.  There are no firmly established answers as to how risk and reward should be assessed in this industry.  This arena is a rapidly changing one, with new ideas and approaches emerging every year.

Why should the decision to allocate money to private equity pose more difficulties than other asset classes, such as government bonds or European equities?  The crucial problem lies in the nature of the investments that general partners make.  What makes private equity particularly tricky to evaluate is the fact that private firms affected by three essential problems:

  • First, the firms receiving capital from private equity funds very often remain privately held for a number of years after the initial investment.  These firms have no observable market price. In addition, the private equity funds themselves, which are typically structured as private partnerships, do not typically trade on an organized public market.  Hence, investors cannot observe their valuations.
  • Second, valuations assigned by private equity firms to their own portfolio of investments are often based not on quantitative metrics (such as price-to-earnings, market-to-book, or discounted cash flow), but rather on complex, frequently subjective assessments of a venture’s technology, the market opportunity it can expect and its management team.
  • Finally, private equity valuation levels, as a whole, appear to rise and fall dramatically over time in response to the fundraising environment.  For example, when considerable capital is flowing into private equity funds, valuation levels rise significantly, and vice versa.  Work exploring the U.S. venture capital industry makes this point explicitly, showing that each doubling in the level of fundraising was associated with between a 7% and 21% increase in valuation.  These results suggest that more than the forty-fold increase in venture fundraising between 1991 and 2000 in the United States alone led to a six-fold increase in valuation levels.

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But despite these difficulties, practices in this arena seem far from ideal. A recent example is from the buyout industry following the September 2008 financial crisis. During the fourth quarter of 2008, private equity funds reported returns of -16%, according to Cambridge Associates. This might seem bad enough, but many observers were skeptical about these reported returns. In particular, they pointed out that over the same period, the S&P 500 declined by nearly 22% and many other benchmarks did even worse. Moreover, in most cases the equity of the buyout funds was highly leveraged, and thus the effect of any losses should have been magnified.

Based on these vignettes, many readers might end up agreeing with Bob Boldt, the head of University of Texas’ endowment, who when discussing the private equity performance numbers that the University had disclosed, noted “I hope when people write about these numbers, they include some sort of warning like on cigarette packages.  They can be harmful to your health if you pay attention to them.  To be sure, the calculation of private equity returns is not an easy challenge. But as we will discuss in the session, there are ways to look systematically at these issues.

In general, it is hard to be convinced that there is a definitive answer about thinking about the risk and returns of private equity. In general, it is fair to say that most studies conclude venture firms match or slightly exceed the benchmark, while most suggest that buyout funds lag returns. But few studies have included the boom period for buyout funds in the mid-2000s and the subsequent bust, and thus, subsequent funds may differ.  Moreover, the results seem incredibly sensitive to assumptions made while modeling the evolution of the value of private equity portfolios.

Nonetheless, the importance of the topic cannot be understated.  As the recent financial crisis has underscored an understanding of the risks one is assuming is absolutely essential.  Thus, investing in understanding the key issues in this arena will pay substantial dividends.

About Josh Lerner

Josh Lerner is the Jacob H. Schiff Professor of Investment Banking at Harvard Business School.  His focus is on the world of alternative investments, with a particular emphasis on venture capital, private equity, and sovereign wealth funds.  He also examines how public policies can boost entrepreneurship, most recently in the book Boulevard of Broken Dreams. In the 1993-94 academic year, he introduced “Venture Capital and Private Equity” has consistently been one of the largest elective courses at Harvard Business School.  He is leading an international team of scholars in a multi-year study of the future of alternative investments for the World Economic Forum.

Post Under: Middle East

SuperReturn Asia 2010 - A complete round up of news and views

October 4, 2020

SuperReturn Asia is the “must attend” annual private equity and venture capital conference for the region.  The 2010 event continued that tradition.    We would like to thank all the delegates, speakers and sponsors and look forward to bringing you an even more energised event in 2011.

In addition to the coverage of the event by Beverly Chandler,  we’ve gathered the leading articles and commentary from the business news websites to give you a comprehensive review of this years hugely successful event.

We have captured a series of video interviews with some of the industry leaders which will be posted on this site over the coming weeks.   To make sure you don’t miss out, either add the RSS feed to your reader or sign up for email alerts.

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A Twitter Overview:

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@LPlatform: The poll at SuperReturn Asia Conference showed that 51.7% of professionals believe China will bring the best returns in the next 3 years.

@SuperReturn: Ben Simpfendorfer,RBS gives fascinating talk on new silk road in hk #sra10 More here http://ht.ly/2M9Ft (via @SuperReturnSara)

@SuperReturnSara: Jin Liqun, CIC says it is still expected for capital to flow uphill from developing countries to developed #sra10

@SuperReturnSara: Anil gupta, insead could chinese capital do investment into india infrastructure and aid investment? #Sra10

@SuperReturn: Liqun says the Chinese have been students learning from the West: “Now you should learn something from us.” #SRA10

@SuperReturn: If foreign investors work closely with locals they will have a very good time investing in China says CIC’s Jin Liqun. #SRA10

@SuperReturn: China is the undisputed powerhouse for global economy says Jin Liqun of the CIC. #SRA10

@HelenHChan: The West is 450 bn dollars short of capital and Asia is 115bn dollars long in capital, says Paul … http://tmi.me/1MsYM

@SuperReturn: Melissa Ma of Asia Alternatives reports valuations are back to recent peaks #SRA10

@NorthusSuperreturn asia just started. Fascinating talk by jonathan anderson,ubs. Emerging markets are going to win

@Northus:  Good morning from SuperReturn Asia where UBS’s Jonathan Anderson and Paul Schulte of CCBI are crystal ball gazing on the economy. #SRA10

@SuperReturn: The West is 450 bn dollars short of capital and Asia is 115bn dollars long in capital, says Paul Schulte, China Construction Bank. #SRA10

@SuperReturn: Property boom in China is crucial to understanding the area says UBS’s Anderson. Property prices 135 per cent up over decade. #SRA10

@SuperReturn: The emerging world is growing at 7. 2 per cent says Jonathan Anderson of UBS and Asia will continue to for 5 to 7 years. #SRA10

@SuperReturnSara: Too much money chasing too few deals? Being discussed now at #Sra10

@Northus: Jin Liqun, CIC says it is still expected for capital to flow uphill from developing countries to developed #sra10

@HelenHChan: Jin Liqun of CIC says China’s #SWF seeks long term, risk adjusted returns #SRA10

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Reuters - CIC to avoid defense, casino investments

China Investment Corp, China’s $300 billion sovereign fund, will stay clear of investing in defence, casino and alcohol-related sectors, a senior official told a private equity conference on Wednesday.

“We will not do anything that has a reputational risk for us,” CIC supervisory board Chairman Jin Liqun said in an address at the Super Return Asia 2010 conference. more here.

Reuters - Asia PE funds flush with cash, desperate for talent.

Asia’s private equity (PE) industry is sitting on a cash pile, estimated at $50 billion, but a shortage of experienced fund managers is a big worry for the sector.

A snap poll of about 250 PE experts at Super Return Asia 2010 conference showed that about 44 percent considered too much cash as the biggest risk to the industry, followed by absence of experienced fund managers. more here

Wall Street Journal - CIC among biggest investors in 3i Eur 1.2B growth fund

China Investment Corp., the country’s $300 billion sovereign-wealth fund, was one of the biggest third-party investors in 3i Group PLC’s (III.LN) EUR1.2 billion growth capital fund raised earlier this year, a person familiar with the situation said Wednesday. more here

Bloomberg - China’s foreign buyout investments slow on local competition

Foreign private-equity investment in China has slowed as competition from domestic funds pushed asset prices higher, said Antony Leung, chairman for Greater China at Blackstone Group LP.

Some local funds are more aggressive and tend to outbid overseas buyout firms, Leung said in an interview at the SuperReturn conference in Hong Kong today. The absence of a capital shortage and demands for higher valuations for assets also pose challenges to foreign private-equity funds, he said. more here

Post Under: Asia

How Active Are GPs in Portfolio Companies?

September 10, 2020

Recent Research on Asia Private Equity by Grant Fleming, Partner, Continuity Capital Partners

Grant Fleming, Partner. Continuity Capital Partners will be speaking at SuperReturn Asia, 28 – 30 September 2020 in Hong Kong

The last ten years of Asian private equity has witnessed substantial growth in the number of firms, assets under management, and contribution of private equity to M&A activity. We have seen the emergence of large public-to-private transactions, a scalar change in the size of local private equity markets in China and India, and private equity professionals develop and hone skills consistent with global best practice.

Institutional investors in private equity are more discerning about manager selection, favouring firms where there is clear evidence of active equity ownership by private equity managers in their portfolio companies (leading to demonstrated excess returns above listed equities). Our understanding of how active Asian GPs are in portfolio companies has been improved recently by several studies, which we describe below.

Academic studies on U.S. and European private equity have found that private equity owners are active owners. Private equity backed firms are more likely to be involved in M&A, and to perform better than industry competitors. GPs also hold company management accountable for financial and operational performance. As a result, it is not uncommon for LBO companies to have turnover at senior management positions (see Acharya, Hahn and Kehoe 2009). Venture capitalists have been found to add value to portfolio companies through strategic advice, access to networks and aiding the “professionalization” of start-up firms (see Hellman and Puri 2002).

Until recently there were no large sample, empirical studies on whether Asian GPs are active in their portfolio companies to the same extent as elsewhere. That has now changed. The recent research tells us the following:

  • Asian GPs are active owners of companies, helping shape strategic and operational change Cumming, Fleming, Johan and Takeuchi (2010) analysed over 400 Asia transactions over the last 20 years to provide the first evidence on operational change instigated by Asian GPs in companies. Asian LBOs are more likely to involve acquisitions than divestitures, a contrast to the U.S. and Europe where corporate restructuring through divestitures has been a common activity for GPs. Companies operating in the growth markets were very active in acquisitions - China (85% of firms made an acquisition), South Korea (85%), Taiwan (73%), and India (70%) - although Asian GPs operating in slower growth “developed” economies also had made their fair share (e.g. Australia: 52%). Divestitures were less common than acquisitions in all markets, with usually only about 10% of firms in each country divesting divisions.
  • Corporate governance improves following a management buyout Li, Wright and Scholes (2010) studied 19 Chinese management buyouts to see how corporate governance changed post-buyout. Changes were noted in several areas. First, board size decreased from, on average, 11 people to 8 people. Second, the proportion of independent directors increased from less than 10% of the board, to over 40%. And finally, there was an increase in the frequency of board meetings. In sum, management buyouts improved corporate governance and moved these firms closer to international best practice.
  • Asian management teams are held accountable to performance targets − Cumming, Fleming, Johan and Takeuchi (2010) also examined management turnover. They found that Asian GPs instigate managerial turnover in about one third of Asian LBOs (i.e. a change in CEO, chief financial officer, and/or chief operating officer).  Also, there was no difference in management turnover between “growth capital markets” such as China and India, and “LBO markets” such as Japan and Australia.  Private equity ownership is active ownership despite the structure of local labour markets, or other cultural factors which may a priori lead one to believe that turnover of senior management is difficult.

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The Asian private equity market is still young in its development, and Asian GPs often still need to sell the virtues of private equity ownership to entrepreneurs and management teams. This new research gives prospective private equity recipients, and investors in the asset class, additional insight on how Asian GPs behave, and whether they are implementing value adding, active equity ownership in private companies. That Asian GPs show that they are just as likely as elsewhere to be active owners alongside management bodes well for the growth of private equity as an attractive form of equity ownership in the region.

Grant will chair the Private Equity Strategies day at SuperReturn Asia 2010 (27 -30 Sept), which will look at buyouts, the capital growth outlook and what is the next hottest market in Asia?

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About Grant Fleming, Partner, Continuity Capital Partners

Grant has worked in illiquid asset markets in Asia for 10 years, with particular focus on private equity, and credit and distressed opportunities.

Grant began his work in finance markets while an academic at the University of Auckland and the Australian National University. Between 1989 and 2001 he lectured on economics, business history, corporate finance and private equity, and led a series of research projects on analyzing the development of business in the twentieth century, and the empirical analysis of private capital markets. He has authored over fifty academic articles and two books, and continues to publish in scientific journals.

In 2001 Grant joined Wilshire Associates Incorporated, researching and building Asian private equity and distressed debt portfolios for a global investor base located in Australia, Japan, U.S.A and Europe. He was also a member of the firm’s global investment committee and led the private market division’s research program. Between 2006 and 2010 was located in Japan, establishing the firm’s North Asian research team.

Grant holds Bachelors, Masters and PhD degrees in economics from the University of Auckland

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Further Reading

Acharya, V., Hahn, M. and Kehoe, C. (2009) “Corporate Governance and Value Creation: Evidence from Private Equity” NYU Working Paper No. FIN-08-032. Available at SSRN: http://ssrn.com/abstract=1354519

Cumming, D., Fleming, G.,  Johan, S. and Takeuchi, M. (2010) “Corruption, Legality and Buyout Returns” paper to Law, Ethics and Finance Conference, York University, Canada, 16-18 September.

Fleming, G. and Takeuchi, M. (2010) “Leveraged Buyouts and Control Oriented Investments in Asia” forthcoming in D.J. Cumming, ed., Handbook of Private Equity (Oxford University Press). Available at SSRN: http://papers.ssrn.com/abstract=1577471

Hellman, T. and Puri, M. (2002) “venture Capital and the Professionalisation of Start-Up Firms: Empirical Evidnce” Journal of Finance, vol. 62(1), pp. 169-197.

Li,Y., Wright, M. and Scholes, L. (2010) “Chinese Management Buyouts and Board Transformation ” paper to Law, Ethics and Finance Conference, York University, Canada, 16-18 September.

Post Under: Asia


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