The good news is that the private equity (PE) industry is, basically, stuffed. "Life on the whole will get a lot tougher and a lot less financially rewarding for GPs (general partners in PE firms). Sitting back, using financial leverage and flipping companies to another GP or strategic buyer will no longer be an option", one of the PE industry's finest, Guy Hands, boss of PE firm Terra Firma, told a Miami conference last week.
Hands predicted that PE fund sizes will shrink, general partners in PE companies will be paid 75% less than they get now, and some PE firms will go out of business.
Good, Good, and Good again.
PE funds are the idiot so-and-sos who loaded Freescale and NXP with $10 billion and $6 billion of debt respectively.
Their core competency is finding tax loopholes.
Leading the battle to control these idiots is an ex-Prime Minister of Denmark, now an MEP and leader of the party of European Socialists, Poul Rasmussen.
Rasmussen is behind an EU directive which proposes that: funds over €100m must be authorised and supervised; only authorised funds domiciled in Europe can market themselves to European institutional investors; non-EU funds must meet tough regulatory standards; if leverage is used the investors and regulator must be informed; PE firms must disclose their performance to investors.
They seem mild enough proposals, common sense really, but the PE companies are up in arms about them. They'll all move to Switzerland they say.
If so, and if that means they can't buy European companies and load them up with debt, then what an excellent outcome that would be.
And just imagine the technological advances which all that money could bring to the cuckoo clock.
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Good, Good, and Good again.
PE funds are the idiot so-and-sos who loaded Freescale and NXP with $10 billion and $6 billion of debt respectively.
Their core competency is finding tax loopholes.
Leading the battle to control these idiots is an ex-Prime Minister of Denmark, now an MEP and leader of the party of European Socialists, Poul Rasmussen.
Rasmussen is behind an EU directive which proposes that: funds over €100m must be authorised and supervised; only authorised funds domiciled in Europe can market themselves to European institutional investors; non-EU funds must meet tough regulatory standards; if leverage is used the investors and regulator must be informed; PE firms must disclose their performance to investors.
They seem mild enough proposals, common sense really, but the PE companies are up in arms about them. They'll all move to Switzerland they say.
If so, and if that means they can't buy European companies and load them up with debt, then what an excellent outcome that would be.
And just imagine the technological advances which all that money could bring to the cuckoo clock.
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Comments (4)
So the state comes in to prevent the more rapacious element of the private sector doing damage. Seems reasonable.
But hang on...why were the PE people able to act like this and set up such outrageously leveraged deals?
Well that would be because money was cheap for these people.
Interest was held far too low for a long time.
And who set the central interest rates in the US, UK, and elsewhere?
That's right...the central banks.
So you now have a Government solution to a problem that was caused by Governments. Nice one!
Posted by DWL | May 7, 2009 8:31 PM
Posted on May 7, 2009 20:31
Well DWL, you don't often see a policeman in the village where I live but that doesn't encourage us to commit crimes. Semiconductor big-wigs were saying the PE takeovers of Freescale and NXP would be a disaster from day one. PE funds are just not equipped to manage sophisticated businesses for the long-term. Nor do they normally want to manage them long-term. Lax government contributed, but PE committed the crimes.
Posted by David Manners
|
May 7, 2009 9:31 PM
Posted on May 7, 2009 21:31
You seem to be labouring under the same misapprehension as Orson Wells in the film The Third Man. The cuckoo clock was not invented in Switzerland, it was invented in Germany.
Posted by Anonymous | May 12, 2009 4:53 PM
Posted on May 12, 2009 16:53
Anonymous, OK Mr Clever Clogs, of course you're right, but the Orson Welles version is so much more satisfying (even if untrue).
Posted by David Manners
|
May 12, 2009 11:14 PM
Posted on May 12, 2009 23:14