The Great Debate UK
from Felix Salmon:
Facebook doesn’t care where Goldman gets its funds
The NYT is reporting that Goldman Sachs only made its $450 million investment in Facebook after its in-house private equity fund, Goldman Sachs Capital Partners, passed on the deal.
Many people -- including the NYT -- have been talking a lot in recent days about the "ancillary business" that Goldman is likely to get as a result of this investment, including fees from any future IPO and wealth-management fees for looking after Mark Zuckerberg's fortune. There's no formal agreement about any such things, I'm sure, but the general understanding seems to be that if Goldman scratches Facebook's back by raising a couple of billion dollars for it now, then Facebook will scratch Goldman's back in future with various lucrative bits of investment-banking business.
Goldman, it seems, would have loved to get all those fees without having to put its own money into the deal -- and then when GSCP said no, it ponied up the requisite cash itself.
But that means something important: that from the point of view of Facebook, Goldman's client, there's really no difference between Goldman investing and GSCP investing -- whether the money was borrowed from the Federal Reserve or invested by rich clients. Goldman Sachs and GSCP are two faces of the same company and either way Goldman is likely to end up with those ancillary fees.
from The Great Debate:
Carried interest and the big lie
As an investment strategy, making private equity and hedge fund managers rich is a probable loser. As a tax policy, it is a guaranteed one.
The U.S. House of Representatives passed a bill last week that would raise the taxes that private equity and other investment managers pay on "carried interest," their share of the takings when a holding such as a startup or turnaround is sold at a profit.
from Commentaries:
Take the L out of LBO
In a perfect world, we would simply ban leveraged buyouts. The vast majority of these debt-laden corporate takeovers are no less predatory and value-destroying to a company than a loan shark who charges usurious rates of interest.
Realistically, a prohibition on private equity deals will never happen, given the big dollars involved in these transactions and the sizeable campaign contributions that private equity chieftains shower on politicians from both parties.
Reprieve, but Ineos is still toxic
– Neil Collins is a Reuters columnist. The views expressed are his own –
Ineos Group, popularly described as Britain’s largest private company, has escaped the hangman’s noose again. For the second time, a sufficient majority of the 230 banks to which it owes 7.5 billion euros have granted it a stay of execution.
from The Great Debate:
3i in distress, please give generously
-- Neil Collins is a Reuters columnist. The views expressed are his own --
Were 3i a normal investment company, its directors would be laughed off the board if they proposed raising new equity at a whacking great discount to net asset value.
Upbeat noises about a strengthened balance sheet, future access to the debt markets (sic) or the glittering new investment prospects ahead wouldn't make a blind bit of difference. The board would have to go.
EU funds regulation hits the wrong target
– Margaret Doyle is a Reuters columnist. The opinions expressed are her own –
If generals have a habit of fighting the last war, regulators are prone to fighting the war that they think they ought to have fought.
Don’t say aye, aye to 3i
– Neil Collins is a Reuters columnist. The opinions expressed are his own –
It’s hardly surprising that the shareholders in 3i, the listed private equity group, are deeply unhappy at the prospect of having to return 700 million pounds of the 1.75 billion pounds of capital they have received from the company in recent years.
from The Great Debate:
The future is smaller for private equity
-- Margaret Doyle is a Reuters columnist. The opinions expressed are her own --
Investors' faith in banks may be reviving, but 2009 is shaping up as a year of reckoning for private equity. Two of Europe's most prominent listed buyout funds -- Candover Investments and SVG Capital -- are considering their options, with sale or dismemberment a serious prospect.
How the mighty are fallen! For more than a decade, the listed PE funds outperformed the market, and the managers earned rich fees nicknamed "2 and 20" -- 2 percent of funds under management and 20 percent of performance above a certain benchmark. But that outperformance has disappeared in little more than a year with many funds languishing in the "90 percent club" of shares that trade for less than 10 percent of their peak. Funds are blaming a killer combination of lousy returns, a debt drought and an investors' strike.
