Thursday, January 27, 2011

Industry Thoughts | ACG And Lobbying, Part II

Back in December, I wrote a post (which also got on The Term Sheet) curiously questioning why ACG (the Association for Corporate Growth) does not have a lobbying arm within the organization. I went to yesterday's ACG NY Healthcare Conference and got to meet with some heads. I asked about the lobbying movement and I got these answers:

  • The lobbying movement will strictly be informational; the organization voted to not make a more aggressive move but to continue sharing information about private equity industries and how PE has been beneficial through job creation, production efficiency, etc.
  • The reason why there also hasn't been an aggressive move is because members of ACG aren't only execs from private equity firms. You have C-level executives, service providers, and people from other random areas, so you can't entirely say that ACG can solely lobby for private equity.
  • There also has been a movement within ACG to its members to connect with Congress; members should be contacting Senators and Representatives to give them a lesson in how private equity has been helping the state. In other words, there are companies that have key facilities in the represented states that are a) partly or majority owned by private equity firms and b) have brought a significant number of jobs to the state itself.
It was a good answer from the execs I talked with. I hope that the "talk to your Senator" movement gets stronger because, well, all we have going on now is some mid-market PE execs trying to fight the SEC registration requirement in new legislation.
Good luck, ACG!

Wednesday, January 26, 2011

Industry Thoughts | The Hooters Story

UPDATE: Dan Primack wrote the article about Wellspring's bid for Hooters of America. The link has been added below.

One of the great things about consumer goods-focused private equity deals is that many recognizable companies and brands get involved. The latest one is with the famous beer, wings, and attractive servers chain Hooters of America (HOA).
To break it down, Wellspring Capital Management had made a bid for the chain last year, but the chain was then sued by one of its franchisees, a South Africa-based firm named Chanticleer Holdings, for violating the right of first refusal deal it had with a 2006 loan provided to HOA. Now, with 2 private equity firms as co-investors (KarpReilly and HIG Capital, as I found out yesterday thanks to The Deal Pipeline), Chanticleer made a $250MM bid for HOA, and Wellspring is suing for breach of contract.
PEHub has covered the deal here, and Dan Primack has covered it here. Here are my thoughts:

  • I'm not surprised that HIG Capital is involved here. They aren't slowing down in terms of deals from 2010. Continue keeping an eye on them, as the Miami-based firm is slowly expanding too.
  • I'm surprised that (according to Dan) HIG did the deal through its New York affiliate Bayside Capital. I wonder if their New York office was involved at all...(I know a few of the execs there)
  • Dan mentioned that Hooter's is supposed to make over $1 billion in revenue while Chanticleer has a market cap of only $7MM. I believe PEHub or the WSJ PE Beat Dan wrote about the initial deal by Wellspring a few months ago, and they mentioned that many of the chains now are run by a bunch of different franchisees. By buying HOA, HIG/KR/Chanticleer is probably only getting a few chains and will have to deal with those franchisees to get more.
Regarding that last point, I wouldn't be surprised if the consortium works to get as many chains as possible. It just comes to show that private equity firms aren't afraid of some stereotypes.
After all, the great Chris Rock said in his song No Sex in the Champagne Room: "Nobody goes to Hooters for the wings..."

Tuesday, January 18, 2011

Industry Thoughts | Blackstone Joins the Social Media Fun

Before I begin this post, I'd like to take this moment to address those who were unhappy with my last post. 
My statement is: 

(This PSA brought to you by Bart Scott)

Now that that's out of the way, today's big private equity news (besides ex-Silver Lake advisor Ric Andersen joining lower middle-market PE firm Milestone Partners - congrats to both sides by the way) is that Blackstone became the second private equity firm to join Twitter. (The first one is The Riverside Company, with their account link being @TheRiversideCo. Their new twitter account, @blackstone, has only 1 tweet (a link to their Q4 earnings conference call), but the story has been making the publication waves nonetheless.

Financial journalist/awesome lady Heidi Moore wrote an article a while back on PEHub (can't find the URL at this point, will keep searching) about private equity and Twitter. One of her passages sums up why I think the site is helpful for the industry, especially mid-market and mega funds:

Twitter is an excellent way to stay on top of your industry, whatever your industry is. You don’t have to have a populist cause or a populist industry. There are gazillions of prolific venture capitalists using it. And if the derivatives powerhouse CME Group can be so successful on Twitter that it attracts 755,000 followers to its tweets, then there’s no excuse for private equity to hole up in the fetal position and whine about how hard it is to get people to understand what it does.

A few private equity executives are also quite busy on Twitter:

  • Lynn Tilton, the famous fearless leader of Patriarch Partners
  • John Nowaczyk, Principal at Milestone Partners
  • Rich Lawson, Co-Founder and Managing Director of Huntsman Gay Global Capital (and the profiled tweeter in Heidi's article)
Congrats to Blackstone for joining the Twitter universe. It's great to see a large firm come in, and I hope to see a few other firms and execs join in, including:
  • Carlyle Group: From the 43 investments in 2010 to Rubenstein's thoughtful words, it would be great to see Carlyle (and Rubenstein) create accounts.
  • Providence Equity Partners: Jon Nelson is basically the reason why the Private Equity Council included the words "Growth Capital" into its name. His interview with Charlie Rose is all I need to say that he needs an account.
  • Castle Harlan: For those of you who don't know, John Castle, along with having an impressive work resume, has some fun personal adventures, from sailing to flying. I wouldn't mind seeing him share some fun stories on Twitter! (Oh, and it would be nice to see some of their consumer-centric companies like Perkin's & Marie Callender's share some information)
Twitter has become a great source for collecting information. A lot of private equity journalists and resources have been using the site, and it's made my research significantly easier. I've connected with private equity firms thanks to Twitter, so if I could make networking waves, I can see middle and large funds doing the same.

Not Private Equity, But Still Important

Ladies and gentlemen, I present to you...


Please enjoy the following video as well:

See you all in Pittsburgh.

Wednesday, January 5, 2011

Industry Thoughts | J.Crew: The Plot Thickens

Happy New Year, everyone! Here's my first post of the year, I hope you all had a great end to 2010. It appears that PE execs were busy that last week as, as Dan Primack put it, "every private equity firm on the planet announced a new deal within the past 24 hours." Thus, I've been a bit swamped.

That being said, an interesting piece came into DealBook today: Sears and Urban Outfitters have been looking at  J.Crew's books and are seriously considering counter-bids to the original bid made by TPG and Leonard Green. Here are some quick thoughts to why both are thinking about bids:
  • Sears: With many of its brick-and-mortar stores losing customers along with a lack of strong product portfolio, Sears hasn't been able to attract people to brands like its competitors Target and Kohl's (Target moreso) have been; Target's been able to have low-price collections with high-end designers. Two pros come out of the potential bid:
    • By acquiring J. Crew, Sears can promote to consumers that they now carry J.Crew merchandise; their main stores are in rural towns where J.Crew has no footing, so it's a potential win-win for both companies. 
    • Moreover, Sears has to have a few small but strong brands (which I cannot name since, well, I don't any - I don't go to Sears, haha) that could sell in J. Crew stores.
  • Urban Outfitters: UO has really changed from the "go-to store for hipsters" to a store that carries a bunch of nice and affordable clothes and cool accessories. I say "cool" because they sell random things like coffee table books, drinkware, and home items. With their collection of those brands, I see collaboration with UO and J.Crew to introduce their brands to the other's stores.
    • My only problem with UO though is what DealBook mentioned: they have a strong management team that may force Mickey Drexler out. While UO has been very good at building up their brand, stores, and company, you can't force him out of the board.
Looks like we'll find out about bids within the next week or so; the go-shop period for the TPG/Leonard Green bid ends January 15.
Stay tuned!

BONUS: Remember when I wrote about how the SBIC is a key area for private equity? PEHub's Jon Marino has a more detailed take in this latest opinion piece.