Private equity firms have joined the rush to raise money through special-purpose acquisition companies.
Investors prefer their fund managers to invest in private companies through their funds rather than setting up SPACs as new business lines.
Concerns raised by limited partners who put money into private equity firms’ funds include implications for management fees, team focus, asset selection and competition for deals with their main buyout funds.
#SPAC
Investors prefer their fund managers to invest in private companies through their funds rather than setting up SPACs as new business lines.
Concerns raised by limited partners who put money into private equity firms’ funds include implications for management fees, team focus, asset selection and competition for deals with their main buyout funds.
#SPAC
Continuation fund
A continuation fund is a new vehicle that is set up to take on the portfolio investments of a fund that is nearing the end of its lifespan. Traditionally, LPs will invest in a fund with the understanding that they will see a return in around 10 years. However, when a GP wants to hold on to portfolio assets for longer, that promise becomes harder to fulfill. By setting up this new fund, LPs are given the option to cash out, or to stay invested in the portfolio and recommit to a new vehicle.
While a continuation fund can be an attractive solution it can also be complex. No two transactions are the same and each is tailored to the needs of a particular situation. In some cases, several portfolio companies will be transferred to the continuation fund, while others will involve strip sales in which the fund manager sells parts of different assets to the new vehicle. The GPs must also balance the interest of multiple stakeholders.
A continuation fund is a new vehicle that is set up to take on the portfolio investments of a fund that is nearing the end of its lifespan. Traditionally, LPs will invest in a fund with the understanding that they will see a return in around 10 years. However, when a GP wants to hold on to portfolio assets for longer, that promise becomes harder to fulfill. By setting up this new fund, LPs are given the option to cash out, or to stay invested in the portfolio and recommit to a new vehicle.
While a continuation fund can be an attractive solution it can also be complex. No two transactions are the same and each is tailored to the needs of a particular situation. In some cases, several portfolio companies will be transferred to the continuation fund, while others will involve strip sales in which the fund manager sells parts of different assets to the new vehicle. The GPs must also balance the interest of multiple stakeholders.
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SPAC Analytics - Home
https://spacanalytics.com/
https://spacanalytics.com/
Spacanalytics
SPAC Analytics - Home
SPAC Analytics is the leader in providing SPAC data and research since 2007. SPAC Analytics gives investors, asset managers and investment bankers the most robust special purpose acquisition company database in the industry. SPAC Analytics provides updates…
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Crossover fund
An innovative blend of private and public equity investing that maximizes the use of in-depth sector knowledge from the private equity side, and strategic investing opportunities available in the public markets.
These funds also bet on late-stage private equity and pre-IPO firms.
An innovative blend of private and public equity investing that maximizes the use of in-depth sector knowledge from the private equity side, and strategic investing opportunities available in the public markets.
These funds also bet on late-stage private equity and pre-IPO firms.
IRR challenges
A common practice by PE firms is forcing acquired companies to pay a dividend to the private equity fund immediately after acquisition, which boosts the IRR because of the money-weighted calculation. However, the IRR methodology assumes a reinvestment of interim cash flows at equivalent returns, which is largely unrealistic.
For example, a PE fund reports a 50 percent IRR and has returned cash early in its life. The IRR assumes the cash was put to work again at a 50 percent annual return.
In reality, investors are unlikely to find such an investment opportunity every time cash is distributed.
A common practice by PE firms is forcing acquired companies to pay a dividend to the private equity fund immediately after acquisition, which boosts the IRR because of the money-weighted calculation. However, the IRR methodology assumes a reinvestment of interim cash flows at equivalent returns, which is largely unrealistic.
For example, a PE fund reports a 50 percent IRR and has returned cash early in its life. The IRR assumes the cash was put to work again at a 50 percent annual return.
In reality, investors are unlikely to find such an investment opportunity every time cash is distributed.
Gartner predicts that by 2025, the AI- and data-science-equipped VC or PE investor will become commonplace.
Increased advanced analytics capabilities are rapidly shifting the early-stage venture investing strategy away from gut feel and qualitative decision making to a more modern platform-based quantitative process.
Information gathered from sources such as LinkedIn, PitchBook, Crunchbase and Owler, along with third-party data marketplaces, can be leveraged alongside diverse past and current investments.
Increased advanced analytics capabilities are rapidly shifting the early-stage venture investing strategy away from gut feel and qualitative decision making to a more modern platform-based quantitative process.
Information gathered from sources such as LinkedIn, PitchBook, Crunchbase and Owler, along with third-party data marketplaces, can be leveraged alongside diverse past and current investments.
Mezzanine debt
As its name implies, mezzanine debt is situated between the senior secured bank debt and the equity in an issuer or borrower’s capital structure.
Mezzanine debt is typically used to finance leveraged buyouts, recapitalizations and corporate acquisitions.
It is also an alternative to public or private equity for companies seeking growth capital. Typically junior in credit standing, mezzanine debt provides additional capital beyond senior secured debt.
#privatedebt
As its name implies, mezzanine debt is situated between the senior secured bank debt and the equity in an issuer or borrower’s capital structure.
Mezzanine debt is typically used to finance leveraged buyouts, recapitalizations and corporate acquisitions.
It is also an alternative to public or private equity for companies seeking growth capital. Typically junior in credit standing, mezzanine debt provides additional capital beyond senior secured debt.
#privatedebt
PEI 300 | Top private equity firms | Private Equity International
https://www.privateequityinternational.com/pei-300/
https://www.privateequityinternational.com/pei-300/
Private Equity International
The Largest Private Equity Firms in the World | PEI 300
Who are the top private equity firms in the world? Access the PEI 300 ranking to see who the biggest private equity firms by fundraising are.
Distressed debt funds
Distressed debt funds are private equity vehicles that acquire securities, obligations, assets, trade claims, and businesses of financially distressed companies, typically with the objective of obtaining control or substantial influence over such companies.
Such securities or other assets often consist of loans, but may also consist of the equity of these businesses.
Distressed debt funds are private equity vehicles that acquire securities, obligations, assets, trade claims, and businesses of financially distressed companies, typically with the objective of obtaining control or substantial influence over such companies.
Such securities or other assets often consist of loans, but may also consist of the equity of these businesses.
Secondaries
The secondaries market provides liquidity to private equity investors, allowing them to sell positions in private equity funds and liquidate equity stakes in private companies.
Increased liquidity for the seller is certainly a consequence of all secondary sales. Secondary sales have also been driven by LPs’ increasingly active approach to managing their private equity portfolios.
1984
First secondaries fund raised by VCFA
1990
The largest secondaries fund, managed by Adams Street Partners, attracts commitments of £111m
2015
GP-led liquidity solutions become a significant part of the secondary market
2019
The private equity secondaries market hit a new high, with transaction volume of $85bn.
The secondaries market provides liquidity to private equity investors, allowing them to sell positions in private equity funds and liquidate equity stakes in private companies.
Increased liquidity for the seller is certainly a consequence of all secondary sales. Secondary sales have also been driven by LPs’ increasingly active approach to managing their private equity portfolios.
1984
First secondaries fund raised by VCFA
1990
The largest secondaries fund, managed by Adams Street Partners, attracts commitments of £111m
2015
GP-led liquidity solutions become a significant part of the secondary market
2019
The private equity secondaries market hit a new high, with transaction volume of $85bn.
ICC
There's a fixed percentage in the LPA so that every time an investment is made, LPs will contribute say, 1 percent, as an incentive capital contribution for the benefit of the GP and that reduces the fee automatically.
There's a fixed percentage in the LPA so that every time an investment is made, LPs will contribute say, 1 percent, as an incentive capital contribution for the benefit of the GP and that reduces the fee automatically.
The booming stock market and cheap debt financing have helped push leveraged buyout prices to a record high, driven by sectors that have grown as people work and stay at home during the COVID-19 pandemic, such as technology and business services.
Private equity firms paid an average 13.2 times a company’s annual earnings before interest, tax, depreciation, and amortization (EBITDA) for U.S. leveraged buyouts in 2020, an all-time high, up from 12.9 times in 2019.
Some investors are growing concerned about whether buyout firms can deliver the 15% to 20% annual returns they target when they raise new funds.
Private equity firms paid an average 13.2 times a company’s annual earnings before interest, tax, depreciation, and amortization (EBITDA) for U.S. leveraged buyouts in 2020, an all-time high, up from 12.9 times in 2019.
Some investors are growing concerned about whether buyout firms can deliver the 15% to 20% annual returns they target when they raise new funds.