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from Breakingviews:

Square swipes a hollow-looking $6 bln valuation

By Robert Cyran

The author is a Breakingviews columnist. The opinions expressed are his own.

Square is starting to look oddly hollow. The payments company set up and run by Jack Dorsey is set to raise $200 million in new funding, according to Bloomberg. That would value the company at $6 billion. While big, it’s a deflated figure, considering Square’s former hype, the small amount raised, and tech rivals’ ease securing higher valuations.

Square’s credit card readers for smartphones and tablets are easily spotted in the wilds of flea markets and coffee shops. They are easy to use, and the 2.75 percent they charge per swipe is relatively appealing for small transactions. Last year the company racked up more than $500 million in revenue.

Yet it’s a difficult business to make a buck in - and getting harder. Square lost about $100 million last year, according to the Wall Street Journal. That’s because it must pay a majority of the transaction fees to banks and payment networks like Visa and MasterCard. That leaves little to cover overheads and investment needed for growth.

Increasing volume might solve this problem, but finding new users is getting more difficult as competition is increasing. PayPal charges less per transaction for its card reader. So does Amazon, which entered the fray earlier this month.

from Breakingviews:

Dynegy’s $6.25 bln grab marks return of ambition

By Christopher Swann

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

Dynegy only got out of bankruptcy two years ago. Now two deals worth $6.25 billion, announced on Friday, mark a return of ambition for the U.S. power company. It once tried to buy Enron and eventually went bust after a spat involving activist Carl Icahn. The purchases look sensible, but the lesson from Dynegy’s past is to avoid getting carried away.

from Breakingviews:

Blackstone finds way to outsource skin in the game

By Neil Unmack

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Blackstone has devised a novel definition of ”skin in the game”: other people’s money. The buyout and debt management firm is taking advantage of newly relaxed rules on how much risk needs to be retained in securitisations, to improve its returns. Its structure looks acceptable – but regulators and investors should still watch for sharp practice from future copycats.

from Breakingviews:

Private equity discord is best collusion defense

By Jeffrey Goldfarb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Even when it might help them, private equity firms can’t seem to cooperate. Blackstone Group, KKR and TPG are now willing to pay a combined $325 million to resolve allegations that they colluded to limit prices on deals. Three other firms previously settled for less. Carlyle Group is still holding out. Legally speaking, there’s safety in numbers. Yet the buyout shops can’t even agree on how to resolve the case.

from Breakingviews:

Supercharged IPO tax spoils need splitting

By Robert Cyran

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Initial public offerings that generate extra tax spoils are in the spotlight. KKR and Silver Lake are listing web hosting company GoDaddy, three years after buying it for $2.25 billion. The use of what’s called an “Up-C” structure means the company will float with big potential tax deductions on its books. In GoDaddy’s case, investors and sponsors will both benefit. But other IPOs with Up-Cs have seen more dubious arrangements.

from Breakingviews:

Doubling down on First Data may be KKR’s best bet

By Jeffrey Goldfarb and Richard Beales

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Doubling down on First Data may have been KKR’s best bet. The extra cash just injected into the payment processor means the $29 billion acquisition has now absorbed over $10 billion of equity, one of the highest sums ever for a leveraged buyout. A Breakingviews analysis, however, suggests that a return finally beckons.

from Breakingviews:

Henry Kravis cultivates private equity perennials

By Jeffrey Goldfarb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Henry Kravis is sowing the seeds of private equity perennials. U.S. buyout shops like his are selling companies to each other at a breakneck pace. It’s easy to be skeptical about these so-called secondaries. But KKR’s $1.6 billion acquisition of landscaper Brickman Group may turn out to be an example of how such deals can flourish.

from Breakingviews:

Take hedge fund exuberance with grain of SALT

By Jeff Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

A wave of hedge fund exuberance should be taken with a grain of SALT. At SkyBridge Capital’s so-named Las Vegas confab this week, a near-unanimous confidence emerged amid moans about conference fatigue. Long-anticipated opportunities in M&A, bargains in Europe and collapsing correlations have finally arrived all at once, if some of the world’s richest investors are to be believed. The consensus itself may, however, give reason for pause.

from Breakingviews:

Hedge fund customers’ yachts washing further away

By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Hedge fund customers’ yachts are washing further away. The flood of money – now $2.7 trillion – in hedge funds has squashed returns below public stock markets. Private equity doesn’t seem to be doing much better. Investors beware.

from Breakingviews:

WH Group’s pulled pork IPO is least bad outcome

By Una Galani
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

This little piggy isn’t going to the market after all. WH Group has scrapped its Hong Kong listing after investors turned their noses up at its valuation. The Chinese pork producer had already more than halved the size of the fundraising to as little as $1.3 billion. A delay which gives the company formerly known as Shuanghui more time to integrate its U.S. subsidiary Smithfield is probably the least bad outcome.

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