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Private Equity & Venture Capital
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8/31/2010
Limited Partners At Private Equity Funds Gain Bargaining Power
When negotiating limited-partnership agreements for private equity funds these days, you might prefer to represent the investor, not the general partner. According to attorney Albert Hudec, limited partners now have more leverage at the bargaining table. From distribution waterfalls to management fees to fund governance, best practices are favoring the investors.
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8/31/2010
Foreign Private Equity Still Struggling For A Foothold In China
The Chinese government claims it welcomes foreign private investment in Chinese companies, yet foreign investors still face numerous hurdles. A brand-new vehicle, the Foreign-Invested Partnership, is heavily regulated, but these FIPs might ease the entry path. Attorney Owen Nee explains.
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8/31/2010
Corporate Venture Capitalists Enhance Value For Certain Startups
Venture capital from a traditional VC firm offers multiple benefits for a portfolio company. Economists Vladimir Ivanov and Fei Xie ask whether corporate venture capital, coming from a large corporation, can offer portfolio companies similar (or even more) advantages. For some startups, the answer is yes.
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8/31/2010
When Investors In Private Equity Funds Default On Capital Calls, Remedies Vary
Unfortunately for private equity funds already struggling with liquidity issues, investors these days are missing capital calls. The fund agreement provides remedies, which range from simply charging interest to holding capital back and avoiding future calls. Attorneys Julia Corelli and Stephanie Pindyck-Costantino lay out points to consider when deciding which route to take.
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7/30/2010
Private Equity Dealmakers Pressured By Investors As Well As The Economy
Private equity has suffered in the market crash. Funding is down worldwide, PE firms are losing money, and dividends have been reduced or eliminated. In this environment of restricted credit, operators who relied primarily on financial engineering rather than business or operational improvements are in the red; and, Loch Adamson observes, the blood-letting is likely to continue for a while.
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5/3/2010
Understanding Why Venture Capital Investments End Or Endure
What factors determine when venture capitalists exit a portfolio company? Is the answer different if the investors are in Canada? Studying American and Canadian VC-backed firms, researchers Douglas Cumming and Sofia Johan isolate the influence of participation, industry, company age, syndication, country, and other factors on the duration of a venture capital investment.
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5/3/2010
Venture Capital Must Start Over
Overweight venture capital firms with too much cash make too many weak investments. Prices go up, selectivity goes down, and then the bubble bursts. Udayan Gupta seeks a return to the good old days of venture investing, when small, nurturing firms and angels handpicked great startups with innovative ideas.
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3/26/2010
The FCPA Can Trap Unwary Private Equity Investors
The Foreign Corrupt Practices Act, born in the era of multinational enterprises, has adapted awkwardly to the current global entrepreneurial scene, which is characterized by hands-off investment by private equity firms. Sam Singer traces the statute's concepts of knowledge and control and cautions that the SEC, Justice Department, and courts have applied the law to individual account managers at private equity houses.
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3/1/2010
Why Private Equity's Salad Days May Be Over, Or At Least On Ice
Easy borrowing helped to fuel a rush of private equity investing, but the bank vault these days has slammed shut. Restructuring specialist Patrick Goy sees tight times ahead for private equity firms, amid few new investments or investors and calls for cashing out and distributing the proceeds.
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1/28/2010
What Lies Ahead For Private Equity, After Its Cyclic Slump
Private equity has been on a roller coaster of escalating investment and return, followed by a sharp recessionary contraction. Strategist Joe Rizzi takes a look back at private equity since the 1980s and projects the future. Private equity may take years to recover from the recent credit crisis, the author predicts; activity will continue, but at a much slower pace.
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1/28/2010
Negotiating For Venture Capital In Tough Times
Small companies seeking venture capital financing need to understand the negotiation process, especially in the current inhospitable environment. Attorney Daniel Aronson suggests that business owners decide what they can (and cannot) give up, rather than just standing firm on every point. Liquidation preferences, full-ratchet provisions, and drag-along rights can all be negotiated.
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12/24/2009
Adding Operating Partners Can Boost Private Equity Returns
Financial engineering is not the way to create value; improving company performance is always the better path. Investment bankers Gary Matthews, Mark Bye, and James Howland urge private equity holders to place operating partners at portfolio companies, who can mentor through the changes needed to boost operational efficiency.
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12/24/2009
Extending The Lifespan Of Troubled Portfolio Companies
Compensation incentives, required ownership, and lockup periods help to ensure the venture capitalist's participation after the IPO. Yet for troubled companies, that participation has less impact on post-IPO failure rates than finance professors Khaled Abdou and Oscar Varela expected. Only experience extends the lifespan of a VC-backed company facing delisting.
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12/1/2009
Venture Capital Diversification Delays Exit Rates
Getting financing from a high-profile, high-growth, diversified venture capital firm may seem like the best choice for a new venture, but entrepreneurs, investors, and even venture capitalists themselves might want to reconsider. Professor April Knill finds that diversification cannot optimize both growth and time until exit.
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10/29/2009
PIPEs Once Again Are Thriving
Once popular, then out of favor, PIPEs are back. Private investments in public equity are surging because of financial institutions' urgent need for capital. Attorneys Gregory Gooding and Jeremy Rossman outline the rules and considerations for dealmakers.
