Posts Tagged private equity
Moody’s: Half of Defaulters are PE-Owned
Posted by Packard Acquisition Research in Acquisitions, Mistakes, Risk on March 29, 2010
Think about it;
Nearly half of all of the non-financial businesses that defaulted in 2009 were owned by private equity, according to a Moody’s Investors Service report, which warned that the elevated default rate among sponsor companies will continue in 2010.
1 + 1 should always = 2.1 or more. Otherwise, the risk is just too high.
There are measurable ways of approaching acquisition & tools that lower risk (well worth the investment).
Mike Tikkanen mike@PackardAcquisitions.com 952-542-9318
Geeks Bearing Formulas and other Warren Buffetisms
Posted by Packard Acquisition Research in Acquisitions, Business models, M&A, on April 5, 2009
Geeks Bearing Formulas and other Warren Buffetisms
(Repeated from M and A’s April Dealmaker’s Journal and Warren’s annual Letter to His Shareholders);
“Private equity is a name that turns the facts upside-down: A purchase of a busines by these firms almost invariably results in dramatic reductions in the equity portion of the acquiriee’s capital structure compared to that previously existing.”
“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”
“Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel… Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.”
“regulation…could be a catalyst for positive change…it doesn’t have to be a negative” General Electric CEO Jeffrey Immelt, quoted by Wall Street Journal.
Only one thing is more important than learning from experience, and that is not learning from experience. John M Templeton.
“America’s financial architecture is about to be remade…to be brought under federal supervision“Matt Cooper, Portfolio, as quoted in Mergers and Acquisitions Magazine.
All that we are is the result of what we have thought. Buddha
Thomson Reuters reported that about one third of M & A chapter 11 purchases involved financial services business. Mergers and Acquisitions Magazine, December 2008.
The nature of men is always the same; it is their habits that separate them. Confucious
“You’re not bankrupt until people know you’re bankrupt” By which he meant, I’ve come to understand, that money is a complicated reality. It’s a master illusionists game.
The artifice is everything. Transparency is the enemy of making it really big-which is one reason the word ‘private’ got joined to ‘equity’.
(Michael Woolf, in an article The Ultimate Bubble found in the February issues of Vanity Fair as reported in Mergers and Acquisitions magazine.)
No person was ever honored for what he received. Honor has been the reward for what he gave. Calvin Coolidge
You cannot discover new oceans until you have the courage to lose sight of the shore. Anonymous quote
Have something to add? Your own business wit?
Got a different point of view, want to play devil’s advocate, or just think we’re all wet? Post your experiences or examples.
Business Shorts
Posted by Packard Acquisition Research in Business models, Uncategorized on February 4, 2009
Is the L in LBO dead?
Never do anything that you will have to punish yourself for.
“regulation…could be a catalyst for positive change…it doesn’t have to be a negative” General Electric CEO Jeffrey Immelt, quoted by Wall Street Journal.
Only one thing is more important than learning from experience, and that is not learning from experience. John M Templeton.
“America’s financial architecture is about to be remade…to be brought under federal supervision“Matt Cooper, Portfolio, as quoted in Mergers and Acquisitions Magazine.
All that we are is the result of what we have thought. Buddha
Thomson Reuters reported that about one third of M & A chapter 11 purchases involved financial services business. Mergers and Acquisitions Magazine, December 2008.
The nature of men is always the same; it is their habits that separate them. Confucious
“You’re not bankrupt until people know you’re bankrupt” By which he meant, I’ve come to understand, that money is a complicated reality. It’s a master illusionists game.
The artifice is everything. Transparency is the enemy of making it really big-which is one reason the word ‘private’ got joined to ‘equity’.
(Michael Woolf, in an article The Ultimate Bubble found in the February issues of Vanity Fair as reported in Mergers and Acquisitions magazine.)
No person was ever honored for what he received. Honor has been the reward for what he gave. Calvin Coolidge
You cannot discover new oceans until you have the courage to lose sight of the shore. Anonymous quote
Risky Ventures
Posted by Packard Acquisition Research in Acquisitions, Business models, Business valuation, business finance, Equity, Equity groups, M&A,, Mergers, Risk on December 7, 2008
Private Equity’s Appetite for Risk
Risk – a four letter word if there ever was one – is reclaiming its rightful role in acquisitions. The last several years have seen a marked disdain for the concept of ‘possible adverse consequences’.
With every indicator moving up – the exposure to danger was nothing compared to the lure of lucrative deals.
Well, the current market conditions have shown us (again) that past performance is no guarantee of future returns. Yep. You could lose it all.
The statistics bear it out. A 2000 KPMG study found that 83% of acquisitions failed to create the expected return and 53% actually destroyed value. A 2002 six-year BusinessWeek study found that 61% of acquisitions destroyed value.
So what has been going on for the past 8 years? Appetite for risk went up. Way up. Now those chickens are coming home to roost.
Is the solution regulations? Experts say no.
Continued bad results will likely attract more regulation. Better tools and more a more expert approach to M & A will provide improved results and lessen the demand for more regulation.
Equity caught some of Greenspan’s “irrational exuberance.” Deals were made that weren’t ideal – they weren’t even good. Equity needs to make sure it doesn’t reward people for deals no matter their outcome. I firmly believe that Equity has cleared its head and awakened from the binge.
It’s about time.
Make no mistake, deals will still be made. Hopefully, they will be more thoughtful and deliberate. Maybe M&A teams will think to use cutting edge tools and outside experts to minimize their risk and increase their reward.
Maybe, just maybe, M&A will have to earn it.
Risk. Knowing it, containing it, and managing it – is the key to successful acquisitions – not governmental regulations.
