Tuesday, December 28, 2010

Industry Thoughts | ACG And Lobbying

UPDATE: This post got mentioned in Dan Primack's The Term Sheet!! Thanks so much, Dan!!

NOTE: I know, I said I wouldn't write any more pieces in 2010, but this post was absolutely necessary.

After a brief chat with Dan Primack (of Fortune and PEHub fame), I learned that a few years ago in Boston during a keynote, he discussed the opportunity for ACG (the Association for Corporate Growth, the largest and well-known middle market private equity community organization) to start a lobbying arm.
The global organization now has more than 13,000 members and has been making a strong effort to recruit young professionals (e.g., the New York chapter's Young Professionals events always get a good crowd, including myself), so why wouldn't this work? Dan told me that some ACG professionals in Boston were taking the idea pretty seriously, but here we are a few years later and nothing's happened.

I mentioned in my very first post here that the PEGCC can't keep going on with white papers full of typos and incorrect data. It's a matter of time before Congress takes a deeper look at private equity and focuses on operations and not just on the carried interest debacle. The banking industry's lobbying arms have learned how to manage tough political attacks, and I'm concerned that the private equity industry will have no strategy whatsoever when attacks come to their front.

That being said, here's why ACG should seriously consider a lobbying arm:
  • Community: I already mentioned it earlier, but having a powerful member base will help with support, data, and talent to help push the effort.
  • Star Power: Besides having powerful executives that have had exposures to politics, private equity has a rather, well, prominent sports figure who has provided a positive view on private equity. That man is Hall of Fame quarterback Steve Young. (Thank you Rich Lawson, Co-Founder and MD at Huntsman Gay, for the CNBC link!)
  • Marketing: ACG's e-mail newsletters are well-written and easy to find any ACG-specific information. There easily is room for adding a division about lobbying efforts and news.
  • M&A: ACG's main publication, Mergers & Acquisitions, also has its own subscriber and member base, which can provide more marketing help, advice, and data to stronger lobbying efforts.
Thus, there's very little risk to building a lobbying arm. I hope members of ACG are reading this, because we really don't know when private equity will come back into Congress's sights.

Wednesday, December 22, 2010

Industry Thoughts | Private Equity Picks & Sleepers, Fantasy Football Style! (And a personal holiday message)

UPDATE: Added Dan Primack's article looking at private equity in 2011. Also added PEHub's final predictions here.

Sorry for the delay in posts, everyone. I recently took a week-long personal vacation to the wonders that is San Diego; after being there for the first time in almost a decade, I plan to make a California trip twice a year. It's nice to go visit a state where it has artificial weather (since when is it supposed to be warm during December??).

I love fantasy football, like many guys. I've had great years and bad years, and have made smart pickups and trades along the way. With 2010 drawing to a close, and publications talking about the strongest deal-makers, deal statistics, the rise of leveraged loans and dividends, and the 10 best deals, I thought that I, like others, would share my picks, fantasy-football style. Keeping my focus on the mid-market private equity landscape, here are my picks, predictions, and sleepers!

3 of the Busiest Private Equity Firms of 2010:
  • Carlyle: Who else? With 43 investments done this year (dwarfing #2, TPG, who had 25), the firm invested all over the place, from energy to tech, healthcare, retail, and such. 
  • H.I.G. Capital: A steady flow of deals coming from the Miami, FL-based firm had 21 acquisitions, sales, add-ons, and moves in 2010 according to Pitchbook. My contact there who works at the New York office said it was so busy there, he couldn't even step out of the office for a quick cup of coffee with me. My office is around the corner from him too.
  • RoundTable Healthcare Partners: while the firm hasn't done a significant number of deals, quantity-wise, the quality has been good: it has gone into both the pharmaceutical and healthcare services sides and managed to balance their acquisition trends well.
Private Equity Firms To Watch In 2011:
  • Carlyle: They're just getting started.
  • Sun Capital Partners: Talk about a success story! With so many messes to deal with during the recession, Sun has seemed to be able to right the ship. While I see them getting busier with selling more than acquiring, it will be interesting to watch what the firm does, especially in the first two quarters.
  • Lower Mid-Market Private Equity Firms: With some crazy deal multiples (9x? 12x?!?!) happening at the end of 2010, look for that trend to cut down as credit providers will get a reality check that we CAN'T PROVIDE PRE-CRISIS MULTIPLES. Many lower mid-market firms I've talked to have been very patient in terms of deal-making, but a few have some potential LOIs in track to close during the first quarter of 2011. Some have actually managed to close 1 or 2 this month!
Top Industry Picks for 2011:
  • Healthcare Services & I.T.: Obama's healthcare bill may be in some danger of being repealed, but regardless of what happens, the trend towards a streamlined healthcare system is growing fast. From online medical records to qualified staffing services, expect PE to get more curious.
  • Specialty Retail: I still remember Dana Telsey saying to look for more European-centric specialty retailers to come to the US and sell their wares. Honestly, I wouldn't be surprised if private equity firms get to them first.
  • Specialty Food: Consumers are slowly spending more again. There are a lot of food companies with specialized product portfolios (e.g., frozen dinners) that will have to step up their game to garner consumer interest. Like specialty retail, these food providers need to distinct themselves from others.
2011 Private Equity Sleepers:
  • American Capital: With the firm working on reorganizing their debt, the success of the firm in 2011 will really hinge upon how they will be able to manage deal-making under that pressure. Their debt has been marked "Stable" by S&P, but 2011 could still end up either really well or really badly...
  • Residential Building Products: Prominent in the beginning of 2010. I expect the government to look at the housing market situation again in 2011 and work to provide help to homeowners. Homeowners will concentrate more on repairs versus buying new properties, so we may see a few smaller-level building products deals. "When" is the biggest question.
  • Operating Value Creation Becomes Relevant Again: Alan Hirzel, Charles Tillen and Catherine Lemire of Bain's Private Equity Group wrote a long article in Buyouts in November 2010 about the concept of operating value creation. While I definitely agree that it will be relevant (and not just because I work at a firm that provides operating and strategic value creation), it depends on how private equity firms will tackle the situation, either through hands-off work with management, Operating Partners, or hiring the right consulting firm(s).
If I come up with more predictions, I will add to them before the year ends. Happy Holidays, everyone!!

I also wanted to finish my last post of 2010 with this message: 

If there is one great thing about the winter holiday season, it is that it is a time of happiness, giving, and showing love and respect for everyone and everything. Regardless if you celebrate Christmas, Hanukkah, Kwanzaa, or any other holiday, take some time to give back to your community in some way, whether it's donating to a charity, volunteering at a shelter, or bringing toys to children who never get to see or play with any. 

We all have gone through our own trials and tribulations, and we all could use a little comfort from others. Show those who need and could use it some love and support. If there's any time during the year that you can truly show respect for others, your community, your country, and your planet, it's now.

Bless you all and best wishes for 2011 and the many new years to come!! 

Friday, December 3, 2010

Conference Notes | The 2010 ACG CT Private Equity Expo

Man, it's been a while since I've started my day at 5 AM. One Metro North train later, I made it to the Stamford Marriott for the 7th annual ACG Connecticut Private Equity Expo. With more than a dozen private equity firms exhibiting, I was able to catch up with some clients and contacts, make some new contacts, and see what's been going on regarding deal flow.
Moreover, Ramsey Goodrich, the president of ACG CT, presented some results from the ACG-Thomson Reuters DealMakers Survey. Luckily, PEHub already posted the results in text form here.

Some quick takeaways:
  • Closing Deals Before Year-End: I asked many firms on how many deals they're trying to close before the end of 2010. I got various answers from "We're looking for new deals" to as many as 3. Deal flow for mid-market firms is at a case-by-case basis.
  • Tax Situation: Some firms were more worried than others about the current tax situation, but not all of them mentioned it when we talked. A few mentioned that they're not worried at all, as they believed it's going to drag along for at least another 6 months.
  • Strategic Buyers' Market: A whopping 74% of respondents on the DealMakers Survey said that most buyers are going to be strategic, while 11% said it would be moreso private equity firms.   
A great conference overall, and if you're curious about which firms were there, feel free to ask! 

A side note to ACG Connecticut: For the next event, please post the agenda on the event website. People were fine that they had to wait outside 45 extra minutes so private equity firms could talk amongst themselves, but at least let us know that that's going to happen beforehand.