Filed under: Engagements, Venture capital industry, Private equity industry, Investments

Investment conferences are usually pretty dull stuff. A dozen or so execs from small firms each get 20 minutes to stand up at the podium, run through a Power Point presentation and try to convince investors to throw some cash their way. Many investment banks hold them, often specializing in a particular sector.

Now the porn industry is getting what may be its first investment conference. Investment firm AdultVest has announced that it will schedule a series of ongoing meetings to bring potential investors together with business opportunities in the so-called adult entertainment sector. This represents what may be the first go-to gathering for investors to select from a variety of adult-oriented businesses. In short, here’s your chance to be a porn mogul.

These two-day events will no doubt be a tiny spicier than the usual investment conference fare — and in a sign of how popular AdultVest anticipates them to be, the firm will hold them each month. The press release also promises that, as the popularity of these meetings grows, they will be held in new venues like, “hotel meeting rooms, private estates, and private members clubs.”

For the first meeting this week, however, AdultVest execs will present the ‘business opportunities’ themselves to 10-15 invited investors. CEOs of the porn businesses will be invited to later meetings — presumably when they had been properly taught how to present to a Wall Street audience. Meetings will occur on the last Wednesday of each month.

According to the company, attendees will include private equity managers, hedge fund managers, venture capitalists, and angel investors. Also invited are individual investors, investment bankers, financial advisors, and the AdultVest committee that’s in charge of managing the AdultVest Bacchus Investment Fund and the Priapus Investment Fund.

The company also noted that some 647 adult companies have submitted investment proposals, with some 3,380 investors in the pool of “interested celebrations.” There have been 1,833 due diligence requests made by potential investors. While it is reviewing all opportunities, it appears that the company is looking for World wide web opportunities and and gentlemen’s clubs with annual revenues exceeding $1 million. AdultVest is meeting with roughly 20 porn businesses today to assess the viability of each.

There has always been a seedy side to Wall Street, but this seems to be taking it to a new level. This just goes to prove that investment banking can be a lot like dating. There really is someone out there for everyone. Who knows, maybe Paris Hilton can legitimately become the star everyone already treats her as.

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Filed under: Raising money, Private equity industry, Investments

Egyptian buyout firm Citadel Capital may actually be coming public. A report out of DealBook from the New York Times discusses that the firm plans to raise $150 million to $200 million from a public offering later this year.

The firm currently manages $7 billion in assets and intends to use the capital for ventures in the energy, food and manufacturing industries.

This article also noted that according to managing director Mr. el-Houssieny, Citadel is in discussions with four undisclosed international banks regarding the offering. It also notes that it is looking into whether it should list in London, Cairo, or Dubai.

In 2007, the company purchased Rally Energy Corp, a Canadian oil company, for $849 million and was involved in the Egyptian Fertilizer Co.’s $1.41 billion sale.

This would be an interesting change of pace. Envision a private equity and LBO firm in the U.S. announcing it would come public. They would be told to go away until next year. Now imagine if you were selling this only to Americans and it was an Egyptian company wanting to do this. Maybe the decoupling argument isn’t as ludicrous as we think.

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Filed under: Venture capital industry, Private equity industry, Investments, Public or private?

There is an interesting article out of the International Herald Tribune that’s discussing the competitive environment in Asia that has essentially pitted private equity investment money against venture capital investment money.

As economies in South Asia have rapidly expanded over the last decade, U.S. investors have jumped at the opportunities to capitalize on the growth. However, venture capitalists and private equity investors alike have learned that they have to approach investments more cautiously than they do in the United Says. Until the markets in South Asia mature, U.S. investors will likely continue to tread carefully when investing in early-stage growth opportunities.

This article notes that investors are putting their money into companies that have already tested the waters, avoiding early-stage investments that are subject to higher risks and regulatory issues. The size differential here is also surprising when you read into it. Initial funding for a deal in China and India runs much higher, up to $50 million, compared to $2 to $12 million in the United States, because the companies are often already in business, requiring more first-round capital. As a result, the distinction between private equity and venture capitalists is narrowing as they compete for the same mid-stage or later-stage deals in India and China.

In the U.S., the policies are much more clearly defined. Venture Capital firms (and angels) are the ones approached here for seed, start-up, and early stages of financing for emerging companies. Private Equity firms buy established businesses that either can be turned around and run more efficiently or they buy companies essentially for the cash flow streams.

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Filed under: The Blackstone Group, Private equity industry, Blackstone, IPO, 2007

After reaching an all-time low of $15.25 recently, shares of Blackstone (NYSE: BX) have staged a nice comeback. In today’s trading, the stock price is up 6.71% to $17.0.2

So, are we seeing a turnaround in the buyout market? Not necessarily.

This week, there is a “Super Return” conference in Munich. Basically, it’s a get-together for the big-wigs of private equity. And yes, Blackstone’s chief operating officer, Hamilton James, is one of the attendees. Unfortunately, he has more bad news, according to a piece in Reuters.

That’s, the debt markets have continued to deteriorate over the past month — which will make it even more difficult to get deals done as well as work off the big buyout debt backlog. His message is that the tough times will last at least until 2009.

Even so, James thinks there’s still opportunity. Basically, with low prices on buyout debt, Blackstone can pick up some bargains. More importantly, the firm has billions in fresh capital to be opportunistic.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Private equity industry, Public or private?

One of the after effects of the current private equity boom is a record number of buyout shop-owned companies that may find their way back to the public markets.

The Wall Street Journal’s Dennis K. Berman wrote (subscription required) about this this day, saying that, “The mergers-and-acquisition markets have shut, as potential buyers wait for asset prices to decline. One can only hope that a mass of over-leveraged and overpriced assets will stay out of public-investor portfolios. But don’t bet on it. There is too much inventory to move.”

Given that a glut of private equity cash-out IPOs seems inevitable, I think that investors should exercise extreme caution with these companies. Private equity firms won’t be taking their holdings public out of an altruistic desire to share the wealth with you: they’ll be looking to cash out and book profits when they feel they have the ability to get a compelling valuation.

In some ways, I think it’s analogous to the IPO of Blackstone Group (NYSE: BX), which amounted to a perfectly-timed effort by CEO Stephen Schwarzman to cash in his chips — at the expense of anyone who bought in to the IPO.

Investors looking for bargains should bear in mind that private equity firms look to acquire assets at a bargain and sell them at a premium. If you’re buying assets from a private equity firm, you should expect that you’ll have to pay that premium.

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Filed under: Raising money, Private equity industry

This week’s Barron’s reports that private equity funds are still raising plenty of money. The third quarter of 2007 saw a record level of money flowing into private equity funds, over $66 billion. The fourth quarter wasn’t far behind at $51 billion , suggesting that investor interest in private equity funds remains strong.

The huge change is the the size of the funds and the deals they do. Smaller funds set a record for money raised in the fourth quarter, while more massive funds saw their take fall by over 20%.

Although these numbers seem to have surprised some analysts, they make sense. Conventional equity investing looks less attractive as corporate profits are prone to soften. As a result, sophisticated investors look for returns elsewhere, especially in smaller funds doing deals for lesser known companies. In times of market instability, private equity funds tend to see more not less investment.

So while the mega-deals of the last few years fade away for a while, expect to see more smaller deals for companies you’ve never heard of.

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Filed under: Private equity industry

The private equity industry has been at the top of the wish lists of elite business school graduates for the past few years, but those eager young people might find that the industry isn’t as generous as it was not too long ago.

The Wall Street Journal reports (subscription required) that “Leveraged finance is down 82% this year, while announced M&A is down 64% and fee income from private-equity firms is down 74%, according to data from Dealogic and Banc of America Securities analyst Michael Hecht.”

Over the past few years, the ranks of Wall Street workers involved in deals have soared on hopes that the private equity boom represented a new paradigm. As with most new paradigms, this one proved illusory.

Consistent with the rise in new hires, revenue per employee at top investment banks fell sharply in 2007 and, if the numbers cited by Mr. Hecht represent a continuing trend, we could see another, more massive decline.

Note to MBA students: those less glamorous companies that actually, state, make stuff might be on to something.

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Filed under: Bain Capital, Private equity industry

3Com Corp. (NASDAQ: COMS) is seeing a severe snag in its acquisition process, and one that appears might actually kill the merger. This morning it has announced along with affiliates of Bain Capital Partners, LLC and Huawei Technologies that the parties have withdrawn their joint filing for a merger approval to the Committee on Foreign Investment in the United States.

In the release, the company noted that it was disappointed that it was unable to reach a mitigation agreement with CIFIUS to secure the necessary merger approval. 3Com’s board of directors approved the merger back on September 28, 2007. While both celebrations remain committed to continuing discussions, it is fairly difficult to imagine that they’ll be able to overcome government oversight.

3Com is going to have to go back to basics and focus on its own business plan for the time being, regardless of continuing discussions. Read the rest of the backgrounder at 247WallSt.com.

Jon Ogg is a partner and editor of 247WallSt.com.

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Filed under: Private equity industry, Investments

Just when you think private equity is dead, big news break. Reuters has reported that private equity firm Blue Ridge has just raised $1.45 billion for a new private equity fund to invest in Chinese companies. This follows most of its 2006 fund of $300 million being mostly committed.

The Chinese have already taken steps to cool red hot growth in China, but apparently some can still find value there when others might not be able to take advantage of the situation. When you see the U.S. banks and many of the European banks in more and more trouble and with write-downs growing, it is no surprise that newer and previously less-known funds may get their chance to rise. Blue Ridge doesn’t have to worry about answering endless questions on things like CDO’s, mortgages, credit woes, and the like.

The target sectors are energy, retail, real estate, technology and consumer products. Reuters put the time frame for this fund at five years, which is actually rather short for many “CHINDIA” funds that had been stating 10-year horizons for China and India in the not so distant past. Maybe that’s just the new investment climate for you.

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Filed under: Deals, Engagements, Private equity industry

Banks that are lending capital to private equity firms for leveraged buyouts might have a new excuse for the “non-funding” of commitments: their legal departments. The Financial Times reports that legal advisors to banks are starting to advise banks that it might be cheaper for them to not fund these massive private equity loans, even if they have to pay a penalty or have to take a hit from a break-up fee.

In an environment where banks have to write-down loans, write-off certain CDOs, and actually have to fight for survival, this may not be too much of a shocker. According to this report, attorneys said that the break-up fees resulting from ending those commitments would be less than the write-downs related to those loans. Envision that. Attorneys advising clients to walk away from their contracts.

It’s no secret that the days of the new giant club deals are done for the foreseeable future. But there is apparently a new reason that takeover targets can demand either tighter terms or higher break-up fees when private equity buyers come knocking.

Jon Ogg is a partner and editor in 247WallSt.com.

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