Private Equity Forum [沃顿商学院]

ThefirstinaseriesofWhartonPrivateEquityReviewsWhartonPrivateEquityReviewHarnessingtHeWindsofCHange(WG’09)ManoneetSingh(WG’09)SumitSinha(WG’08)MarketingTeamKarinaDanilyuk(WG’09)DimpleKhurana(WG’08)AdvisoryBoardMichaelKopelman(WG’05)Principal,EdisonVentureDeanMiller(WG’99)ManagingDirector,NovitasCapitalVinayNairSeniorFellow,WhartonFinancialInstitutionsCenterStephenSammut(WG’84)SeniorFellow,WhartonHealthCareSystemsandLecturer,WhartonEntrepreneurialProgramsandVenturePartner,Burrill&CompanyJasonWright(WG’00)Partner,ApaxPartnersSpring2008WhartonPrivateEquityReviewHarnessingtHeWindsofCHangeContentsFollowingtheEraofLargeBuyouts,PrivateEquityFundsFindNewWaystoCompetePage2Nowthatcredithasdriedup,thefutureoflargeprivateequitybuyoutshasbecomeuncertain.Today,buyoutfirmsarelookingtocompeteinmiddle-marketandforeigndealsand,inmanycases,areteamingupwithstrategicbuyersandcorporationsinnewtypesoftransactions.AccordingtoPEfirmpartnersandotherindustryexperts,theeconomicdownturnhasalsopavedthewayforaresurgenceindistressedinvesting,aslendersandinvestorsalikebegintoadjusttonewpricingrealities.PrivateEquityAbroad:DespitetheCreditCrunch,OpportunitiesinDevelopedMarketsAreWaitingPage6Withthecollapseofcreditmarkets,privateequityfundsareincreasinglywillingtotreadintounknownterritorytofindnewdealsabroad.WhileinternationalbuyerscontinuetoincreasetheirpresenceintheU.S.,opportunitiesforinvestmentinEuropeandAsiaareequallyabundant,accordingtoprivateequityexperts.Althoughindividualmarketshavetheirinherentchallenges,adoptingaglobalstrategymaybeoneapproachtoweatheringthecurrenteconomicslowdown.WillChangesinTaxationAffecttheCompetitivenessofU.S.PrivateEquity?Page9Atthe2008WhartonPrivateEquityConference,thetopicoftaxessparkedalivelydebate.Accordingtoapanelofprivateequityandlegalexperts,U.S.congressionalproposalstoraisetaxesonthePEindustrycouldhurtitsignificantly,andperhapsevenforceittomoveoffshore.GiventheforthcomingU.S.elections,thedebateoncarriedinterestmaybemootforthetimebeing,butthepanelistsagreedthatit’sahot-buttonissue.SettingupShop:WhatDoesItTaketoEstablishaPrivateEquityFirminToday’sMarket?Page12Establishingaprivateequityfundasafoundingpartneristheobjectiveofthousandsofpractitionersacrosstheindustry.Withthemarketcontinuingtomature,whatarethehurdles,andwhatwillittaketosuccessfullystartaprivateequityshopgoingforward?AleadingprivateequityfundraisingadvisorandtwoleadinginvestorswithextensiveexperienceadvisingandbackingnewprivateequityfirmsdiscussedtheseissueswithmembersoftheWhartonPrivateEquityClub(WPEC).CarlyleGroup’sDavidRubenstein:‘TheGreatestPeriodforPrivateEquityIsProbablyAheadofUs’Page18DavidRubensteinisco-founderandmanagingdirectorofTheCarlyleGroup,theWashington,D.C.-basedprivateequityfirmwithmorethan$70billioninassetsundermanagement.InMarch,membersoftheWhartonPrivateEquityClub(WPEC)interviewedRubensteinabouttheongoingcreditcrisis,theindustryoutlook,theriseofsovereignwealthfundsandwhyprivateequityis“oneofthegreatestexportsoftheUnitedStates.”2Knowledge@WhartonWhartonPrivateEquityReviewtheloanstheydidwrite.“Thenext$10billiondealfeelsyearsaway,”Dalysaid.Theonlyconstantwassellers’highexpectationsaboutthevalueoftheirbusinesses,notedDaly,whoparticipatedinapaneldiscussionaboutlargebuyoutsatthe2008WhartonPrivateEquityConference.Inthefaceofthecurrenteconomicturmoil,however,thoseexpectationshavebeguntodrop.Thebuyoutbusinessiscyclical,headded,notingotherindustryboom-and-bustperiods—inthelate1980s,thelate1990sandagainfrom2002throughtheendof2007.Thepublicmarketsexperiencethesameupsanddowns,hesaid.Thelatestboomcametoanendintheusualway.“Whathappenedwasthatpeoplegotoutofhandwithsomeofthevaluations,”hesaid.Addtothatthesubprimemeltdownanditsignaledtheendoftheindustry’sabilitytodigestdealslikeBlackstoneGroup’srecord$36billionacquisitionin2006ofEquityOffice,theChicago-basedcommercialrealestateinvestmenttrust.Onemajordifferenceinthemostrecentcyclewastheamountofcapitalraised,Dalynoted.Theindustryhasraisedabout$750billionsinceJanuary2006—anamountwhich,whenlevered,wouldbeenoughtofinancedealsworthasignificantportion(15%-25%)oftheStandard&Poor’s500.Buyoutfirmshaveremainedrelativelyflush.“There’sstillastaggeringamountofmoneysittingthere,”saidDaly,whoaddedthatcompanieswillfindnewwaystomakedealsworkevenifthereislessdebtfinancingavailablefromlenders.“Thereisatremendousamountofopportunity.Therearestillgoingtobealotofwaystomakethatcapitalwork.”2Nothingsymbolizedthemostrecentprivateequityboombetterthanhugebuyouts,dealssobigthatprivateequitysponsorsteameduptopulloffthetransactionsinso-calledconsortium—or“club”—dealsthatspurredtalkof$100billiontransactions.Nowthatcredithasdriedup,thefutureoflargeprivateequitybuyoutshasbecomeuncertain.Limitedbythelackofavailabledebtfinancing,buyoutfirmsarelookingtocompeteinmiddle-marketandforeigndealsand,inmanycases,areteamingupwithstrategicbuyersandcorporationsinnewtypesoftransactions.Notsurprisingly,theeconomicdownturnhasalsopavedthewayfor