Since the Economic Recession of 2008, it has been more difficult for private equity firms to secure capital commitments from institutional investors and other wealthy individuals for prospective funds. One of the ways firms spark their fundraising efforts is allowing co-investment rights, normally to large institutional investors, which typically allow the institutional investors to directly…
Tag: Private Equity
Africa: The New Private Equity Frontier
Investing in Africa probably doesn’t sound too lucrative to your average fund manager. The thought of investing in Africa probably seems too risky to most investors with its inadequate infrastructure, corruption, and weak rule of law, the negatives seem to outweigh the positives. Despite these concerns, though, investment in Africa is becoming much more popular,…
Executive Compensation of Private Equity’s Elite
Executive compensation has long been a divisive issue, but in the wake of the economic recession and with the ever-increasing economic disparity that exists in the United States, it is an issue that does not seem to be going away. In 2012, with total compensation averaging $12.3 million, chief executives at the largest firms made…
The Collateral Effects of Tesla’s Proposed $5 Billion Battery Plant
Much ink has been spilled in recent weeks regarding Tesla Motor’s announced plans to build a $5 Billion battery factory somewhere in the American Southwest.1 Tesla has announced that the projected cost of the factory is $5 Billion, with roughly $3 Billion of that money coming from “partners”.2 The projected production numbers behind the plans…
Profits and Politics: PE Firms Put Gun Investments in the Crosshairs
In the wake of the 2012 shooting at Sandy Hook Elementary in Newtown, Connecticut, Americans turned again to the familiar gun control debate. This time, however, an unlikely player was thrust into the spotlight: private equity firms. As the public conversation about gun violence ensued, the pro-gun crowd stood their ground while the anti-gun lobby…
Direct Private Equity
Private equity firms offer investors an investment opportunity that can result in fruitful returns. However, one of the greatest disadvantages associated with such investments is the high management fees investors must pay to the firms. In the past few years, direct private equity has grown in popularity among both institutional and individual investors.1 By putting…
Demand Dividends: An Emerging Alternative to Equity Financing
Definition of Demand Dividends Demand dividends are an investment vehicle where the investee makes periodic payments to the investor based on a percentage of free cash flow, up to an agreed upon multiple of the investment.1 Demand dividends factor the fact that an enterprise can grow revenue without generating cash. Payments are made after a…
Private Equity Investment in Global Shipping Industry
Over 90% of world trade activity depends on the shipping industry and a global fleet of 58,000 ships.1 Shipping has traditionally been controlled by wealthy families that have been in the business for a very long time, some for centuries.2 However, shipping has changed and has become an asset for investors.3 Shipping is a cyclical…
It May Be Time to Revisit Institutional Shareholder Activism
Institutional shareholder activism has often been viewed as a positive corporate governance tool to ameliorate shareholder collective action problems and keep management teams and boards of directors in check, particularly for large public companies with a widely dispersed group of shareholders. Typically, an activist shareholder (ranging from large individual stockholders to institutional investors) will use…
In Re Lyondell Chemical Company, The Long Arm of a Failed LBO
To the interested observer of private equity, a typical leveraged buyout follows a relatively predictable sequence. Most buyouts begin with a sponsor such as KKR or Blackstone forming a limited partnership, serving as the general partner, and acquiring initial capital from investors who form the partnership’s limited partners.1 Once a target company has been identified,…