Filed under: Management, Movers and shakers, Engagements, Private equity industry

Private equity firm Behrman Capital has announced that General Peter Pace, retired USMC and former Joint Chiefs of Staff Chairman, took the role as Operating Partner with the firm. General Pace was also named as Chairman of the Board to Pelican Products, an advanced lighting systems and valuable equipment case manufacturer. He’ll also direct ILC Industries, Inc., a company that provides defense electronics (of course the defense angle).

Allow Behrman of the firm noted that General Pace has forty years tenure in the Marines and then as Chairman of the Joint Chiefs of Staff. Pace graduated from the U.S. Naval Academy and has an MBA from George Washington University.

Behrman Capital is a private equity investment firm with more than $2 billion of capital under management and it invests in management buyouts, leveraged “buildups” and recapitalizations of established growth companies. If you look through the private equity firm’s portfolio companies, you can see why having a former general and Joint Chiefs of Staff Chairman would be a good thing.

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Filed under: Engagements, Private equity industry, Investments

Wells Fargo & Co. (NYSE: WFC) has announced that it has opened a new office in Boston for their investment banking unit, Barrington Associates. It appears that despite the malaise in credit markets and despite the major slowdown in M&A, some firms are continuing to build. The current environment never lasts forever.

Barrington Associates focuses on advising middle-market companies on mergers and acquisitions, restructuring, and private capital arrangements. The new and fifth office will be managed by Gregory Benning and will enable Barrington to access its private equity network in New England.

Interestingly enough, Wells Fargo is the bank that I’ve noted as one of the few survivors in a sea of red as the banking and financial giant didn’t do all of the crazy and reckless activities that have squeezed many other financial institutions. In another piece about financial mergers might be mandated rather than preferred, Wells Fargo was one of the believed survivors and buyers listed there as well.

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Filed under: Financials and analyticals, Private equity industry

JP Morgan Chase & Co. (NYSE: JPM) has announced the launch of DealVault. This is a new technology that tracks private equity investments valuations, performance, risk and exposure analysis. JP Morgan’s unit called Private Equity Fund Services (PEFS) developed the system to provide CFOs, deal and investor relations professionals with a platform to centralize deal tracking information.

DealVault will also integrate with bookkeeping and back office systems, in order to grant administration one platform. Private equity managers will be able to store portfolio company information in a web-based solution, package information in an auditor-friendly format, allow independent valuation reviews, and to cut time spent aggregating and reconciling volumes of data.

This “PEFS” unit already provides a full suite of administration services to private equity firms, real estate firms, and institutional investors; and it currently services more than 200 funds representing $50 billion in committed capital, and serves the world’s largest institutions with $110 billion in aggregate committed capital across thousands of private equity investments.

Does something seem wrong or off about the timing of this launch? In 2006 this would have garnered much attention. In 2007 it would have been mandatory. While the billionaires are all supposed to be immune to economic sensitivity, that just isn’t quite holding up right now. Another wave of private equity will come again, at least that’s what history dictates. But the launch timing is probably one that could have been picked better.

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Filed under: Private equity industry, Management fees

It’s a scary thing for investment bankers: the “credit crunch.” It has essentially depleted the industry, as dealmaking has shrunk significantly.

In fact, according to Bloomberg, there was a 35% drop in M&A fees for Q1.

True, the M&A business is known for its “feast-famine” cycles, but this time it looks like things could be particularly bleak - and perhaps long lasting. Just look at the breakdown of the $19.5 billion buyout for Clear Channel Communications (NYSE: CCU).

Basically, financial institutions are in the process of repairing their balance sheets, and as a result, don’t have the firepower to finance deals — especially big ones. In fact, these firms need to find ways to deal with more than $200 billion in LBO loans.

There is also apt to be a slowdown in strategic acquisitions. That is, as the US economy slows down - which may impinge the global economy - where buyers are likely to get jittery. Why take big risks in such an environment?

Now, there are offsetting factors such as the emergence of mega sovereign wealth funds. However, they may get some political pushback.

In other words, don’t expect a comeback anytime soon.

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: Deals, Venture capital industry, Private equity industry, Public or private?

AirNet Systems, Inc. (AMEX: ANS) has entered into a definitive merger agreement with an affiliate of Bayside Capital. The size of this deal is little when you compare it to the big billion dollar club deals, but deals of this size also have a much better chance of being able to be financed and the size is such that banks won’t have to come up with three million excuses not to fund.

AirNet Systems is a provider of specialized cargo airline and expedited transportation solutions for time-critical shipments like people that must get somewhere 10-minutes-ago, items like canceled checks and other key parcels. Here’s their route structure that it operates in a spoke system if outside of that group. The website states that the company operated 130 aircraft, even though that appears to be an old figure.

The company will be acquired for $2.81 per share, a transaction valued at $28.7 million. The offer represents a 94% premium to Friday’s $1.45 closing price.

As already noted, the size here is little. But this niche is one that sees steady interest from public companies and private companies in what feels like a “regardless of the economy stance” over the last decade. What is even more interesting is that the size of a deal like this crosses over with venture capital players, even if it is already a developed company. VC’s have funded many logistic and niche shipping companies over the last decade and there has been a major consolidation of the smaller players.

The board approved the transaction and awaits shareholder approval in a special meeting. The current management team will continue to manage the company upon completion of the transaction which is expected to close in the second quarter of 2008. AirNet shares are up over 80% today to $2.63, representing a $26.7 million market cap. The 52-week range is $1.38 to $3.69, so this might not be a 100% assurance that all shareholders will vote along with the deal.

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Filed under: GS Capital Partners, Private equity industry, Shareholders, Public or private?

There has been quite a bit of buzz around the trends in special purpose acquisition companies, or SPAC’s, of late. In fact, it seems that about two of each three IPO filings that get filed are from SPAC’s. These SPAC IPO’s offer the public essentially a call option to participate in private equity that’ll end up being publicly traded stocks. Ultimately, these will become operating companies or within 24 to 30 months investors will receive their cash back minus a few percentage points.

Attention is still being given to the fact that J.W. Childs Acquisition I Corp. was filed to raise $200 million. This was two weeks ago too. Some have asked if J.W. Childs is testing the water here or if this is because they would have trouble raising a private equity fund on their own. If you want a confusing explanation, the answer is “both and neither.”

SPAC’s are changing as well. In the past, Goldman Sachs (NYSE: GS) has avoided SPAC’s and blank check offerings. The reason is that the stigma behind these from the 1990’s wasn’t a good one. All things change in time. Goldman Sachs just filed for its SPAC initial public offering this week. They also made the terms slightly more tight than most other underwriters.

Thoughts on traditional private equity firms going into SPAC launches vary already and they will vary only more in the future. But this strategy makes life easier for the private equity firm. For starters, they don’t have to go run through all the hoops associated with raising a private equity fund. They don’t have to use their own sales or biz0dev team to go spend the 90 to 180 days or longer due diligence period. This allows them to make the brokerage underwriting firm go do the leg work and grants them to distribute units that are publicly traded to retail and/or institutional clients. It also gives the private equity firm a two-year time frame as breathing room to go pick their deals.

Arguably, it even grants the firms to go through other private equity firms’ portfolios to see if there are businesses or units that can be bought that would have otherwise been stuck as a buried entity.

There are lots of critics of SPAC’s and traditional blank check IPO’s. But this might be a trend you don’t have to enjoy. You just have to accept it for what it is.

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Filed under: Madison Dearborn Partners, Providence Equity Partners, Private equity industry

BCE Inc. (NYSE: BCE) is recently down 80 cents to $35.26.

BCE, Canada’s largest telecommunications company, announced on June 30, 2007, that it agreed to be acquired by an investment arm of Ontario Instructors Pension, Providence Partners and Madison Dearborn Partners for an announced deal price of $42.75 per share. The Federal Communications Commissions cleared the deal on Dec. 20.

BMO Capital Markets says, “we reiterate our view that BCE stock could trade down to $27 should the deal break and trade in the $30 range on a seasoned basis.” BCE May option implied volatility of 48 is above its 26-week average of 31 according to Track Data, suggesting larger movement.

M&A Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

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Filed under: Deals, Bain Capital, Thomas H. Lee Partners, Private equity industry, Public or private?

Clear Channel Communications Inc. (NYSE: CCU) looks like they’re just going to have to stay public. Shares closed down over 5% to $32.56 on the day but shares are down over 15% to $27.40 in after-hours trading. The Wall Street Journal has reported that the $19 Billion club-deal with private equity firms Thomas H. Lee and Bain Capital Partners LLC and their bankers is all but dead.

This has been covered here with more than skepticism as the real chances of the merger closing, usually with plenty of email responses claiming all is well.

If this deal does end up getting shut, it may get to apply for the Guinness Book of World Records for the biggest and longest merger in history. This volatility behind this merger is starting to look like a soccer match played by kindergartners on a hockey rink.

Someone please just turn out the lights and call this game a loss or a draw.

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Filed under: Financials and analyticals, Private equity industry, Management fees

It’s been a year since Fortress Investment Group (NYSE: FIG) went public. At that time, the offering got a nice reception. After all, investors were hungry for hedge fund and private equity operators.

Of course, that’s no longer the case. And the stock of Fortress has gone from $34 to a low of $9.50.

Well, this week, the firm announced its fiscal Q4 results. There was a net loss of $29.3 million, or $0.43 per share and pre-tax distributable earnings were down 43% to $78 million, or $0.18 per share. Revenues were also lackluster - falling 22% to $196 million. Even though, with a massive amount of assets under management (roughly $33.2 billion), Fortress saw a 43% spike in management fees.

With the roiling credit and equity markets, it’s tough to complete deals. As a result, there hasn’t been much chance to realize gains.

Despite all this, the Fortress conference call was upbeat. Keep in mind that the company focuses on asset-based investments, which tend to have less leverage and lower valuations. Besides, as major banks repair their balance sheets, there should be opportunities for players like Fortress to get some choice deals.

Interestingly enough, Fortress thinks that the second half of 2008 will be quite active. And, if the company can scoop up some transactions at compelling valuations, it could position itself nicely for the next couple years, when things get back to normal.

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

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

This morning there was a rather interesting private equity venture. The AES Corporation (NYSE:AES) and Riverstone Holdings LLC, a New York-based energy and power-focused private equity firm, have announced that they have committed up to $1 billion as part of a new joint venture. This joint venture will develop utility-scale solar photovoltaic (PV) projects. Translation: massive projects for communities more than small individual projects. This deal isn’t very special, but it is rather unusual for traditional private equity.

This will be called AES Solar, and AES and Riverstone will each provide up to $500 million of capital over five years to invest in PV solar projects globally. This follows the traditional independent power producer and wind business growth models noted geographically with favorable tarrifs and incentives. AES also noted that alternative energy currently accounts for 20% of its global generation capacity. The joint venture will be managed by a seven-member board of directors and three directors each will be appointed by AES and Riverstone. It noted that the target is for power grids that range from two to fifty Megawatts in size.

This isn’t the first such venture in the sector, but this is a rather big commitment in the current environment. This almost sounds like chasing a hot sector after the likes of Al Gore’s deeper involvement in investing in the sector from November. It also seems more “VC-esque: than traditional private equity. The lines between private equity and venture capital may be blurring further as capital competes for more deals.

Riverstone has invested in other green and traditional ventures, and here are its other portfolio companies.

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