Industry Thoughts | Private Equity Goes Into Reality TV, Thanks to Lynn Tilton

Talk about an interesting story for private equity today: New York Magazine announced that TV network Sundance is launching a "nonfiction" show about Patriarch Partners CEO Lynn Tilton. The show will be called The Diva of Distressed.

Known for her powerfully blonde hair, 6-inch stilettos, and tight-fitting clothing, Lynn is also a tough and demanding head of the distressed-focused private equity firm she named after her father. (More background info about her, including her hilarious "I only strip and flip men" comment, is in this well-written WSJ piece.)

After watching the clip in the link, I realize what Lynn's trying to do, and it's honorable. Private equity firms haven't tried any successful way to show the general public that they are helping the economy by acquiring portfolio companies. If anything, this is a good start for a helpful PR movement for the industry.
Sadly, because of all the rotten programs that fall under the "reality TV" category, I feel that people will initially judge the show more on Lynn's looks versus what she's actually doing with the companies she now owns and is working on.

Still, it's a good start. Best of luck, Lynn! You can follow her on Twitter here.

Industry Thoughts | Private Equity and the Oscars

What a night for the Oscars. James Franco acts like, well, James Franco, Anne Hathaway continues to show why she's awesome and extremely gorgeous, and Inception didn't get Best Original Screenplay (though hats off to The King's Speech for winning it). While watching the show (and switching between it and the awesome Knicks-Heat game), I realized that, like how I mentioned in my Fashion Week post, private equity firms have significant stakes in film studios!
I thought I'd share a few of them, with the help of Pitchbook:

• MGM (through Spyglass Entertainment/Cerberus Capital Management)
• Miramax (through Colony Capital among other firms)
• Spyglass Entertainment (through Cerberus Capital Management)
• Legendary Pictures (through ABRY Partners, Ridgemont Equity Partners, Falcon Investment Group, and a few others)
• Village Roadshow Pictures (through Tailwind Capital, among other firms)
• RealD (formerly through Shamrock Capital) - great piece from WSJ PE Beat here

It's important to note that you'll see private equity firms put stakes into stronger film production studios in general; MGM, Miramax, Spyglass, Legendary, and Village Roadshow all have strong films within their portfolios. I haven't seen PE interested more in the independent film studios, but it's always good to keep an eye there.

Let's end with a hat tip to Kirk Douglas in light of his amazing appearance at yesterday's Oscars.

Industry Thoughts | Private Equity and Fashion Week

Yikes, sorry for the delay in posts, guys. With our clients keeping us ridiculously busy coupled with lots of deal flow, it's been tough to get a chance to put in a post. Luckily, the wonderful week of color, style, and design known as Fashion Week came to New York, but it didn't slow down deals either.

More importantly, during Fashion Week, two fashion houses were acquired by PE firms: Sun Capital Partners (through Kellwood Co.) acquired Rebecca Taylor, and Castanea Partners acquired Donald J. Pliner. It's no surprise which firms ended up buying the storied houses; Sun Capital has a strong consumer division and Castanea happens to own a few other recognizable fashion labels, including Urban Decay, Ippolita, and Betsey Johnson.
Also, take a look at the WSJ's blog Private Equity Beat on a post-deal interview with Castanea partner Troy Stanfield on Donald J. Pliner.

Fashion and luxury apparel are popular sectors with PE. Margins are very high, brand reputation is getting stronger, and it's not difficult to grow a label if you have the right team behind the brand. Many fashion labels have been PE-owned before, including:

• Stuart Weitzman (Irving Place Capital at one point)
• Jimmy Choo (TowerBrook Capital Partners)
• Harry Winston (Fenway Partners at one point)
• Rafaella (Cerberus at one point)
• J. Mendel (The Gores Group)

It's always exciting to me when a recognizable consumer goods company is acquired by a private equity firm, as brand strength and reputation are powerful keys to a company's growth. It'll be interesting to see if more fashion houses are on the way to going to buyout shops.

Industry Thoughts | The PEGCC's Report On Buyout Activity...And Why I'm Worried

The PEGCC (Private Equity Growth Capital Council) released their 2010 buyout activity report today, and the title says it all: Buyout Activity Returns to 2008 Levels.

This is scary.

I remember at the ACT CT PE Expo late last year that multiples for many deals were going between 9x and 12x, scaring away many of the mid-market private equity firms. Did firms forget what happened a few years ago? I'm hoping that the leverage ratios that buyout shops are using involve a significantly more amount of equity, because this data will not help PE, both with regards to setting the industry up for another dip down as well as how the industry looks in the eyes of Congress.

The link to the article is here (get a free subscription to read it), but here are the key passages below:

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Private equity-based buyout volume for all of 2010 reached $221 billion, according to the report, the highest figure since 2008. The 96 private equity-backed initial public offerings that took place over the course of the year raised over $35 billion globally, up from 32 IPOs that raised $12.7 billion in 2009, the PEGCC said. Exits in the US during 2010 totaled in excess of $110 billion, more than double the value of exits in 2009.

Total fundraising in 2010 reached roughly $104.4  billion, compared to $100.3 billion in 2009 and $99.8 billion in 2004. As of January 2010, buyout dry powder stood at an estimated $446 billion globally.

The PEGCC’s index measures global private equity activity based on total direct investment, buyout transaction volume, fundraising and the dollar value of private equity exits. The index reaches 100 when all four components are at their 10-year moving average. As of the end of 2010, the index stood at 115.3, its highest level since the fourth quarter of 2007.
- - - - - - - - -

Let me know what you guys think in the comments!

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!

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..."

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: 

DEAL WITH IT.

(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...

...POETIC JUSTICE.

Please enjoy the following video as well:

Bart Scott responds to the non-believers

See you all in Pittsburgh.

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.

Industry Thoughts | ACG And Lobbying

UPDATE: This post got mentioned in Dan Primack's The Term Sheet!! Thanks so much, Dan!!
http://finance.fortune.cnn.com/2010/12/29/pre-marketing-12-29-10/


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.