Week in Review: Debut Funds, Distressed and Private Equity’s Wake

For this Week in Review, we are adding a new section: Axial highlights. At the bottom of the article, we have included last week’s data from the Axial network. Check it out.

As for the news, we have seen a few interesting trends emerging. Activity for financial buyers in the distressed space has decreased since sellers have been favoring strategics. Existing financial buyers are getting hit from the other side as well, as new research has shown some surprisingly successful debut funds. On the bright side, the love that pension funds have for the secondary PE market shows no sign of ebbing. Nor does the anti-PE sentiment generated by the election, if John Maxfield has anything to say about it.

Check the articles out below.

LPs Would be Wise to Consider Debut Funds – Have you traditionally avoided debut buyout funds? Too risky, huh? It might be time to reconsider your strategy. As it turns out, these “newbies” have – on average – better IRRs and investment multiples than the rest of the pack. Is it because these funds are do-or-die? Or is it because they have no existing portfolio companies to manage? Whatever the exact reasons, there may be more than beginner’s luck at play here. 

The Buyside, Distressed M&A: Great Expectations – Distressed sellers have begun to favor strategic buyers over financial buyers. The reason? Corporate dealmakers have developed a reputation for better matching seller expectations and – at times – for shelling out a little more cash. In addition to reducing opportunities for PE shops, this shift could increase the risk of distressed buying in general. Read the article to find out more. 

Institutional Investors Still in Love with Secondary PE Market – North American public pension funds have become big sellers on the secondary market. Well, bigger sellers. Pension funds and other major institutional investors have upped their sales of PE interests on the secondary market from $11 billion in 2H 2011 to $13 billion in 1H 2012, and the growth is expected to continue. If you were looking for a good time to jump into the secondary market, this may be your chance. 

How to Secure Capital Investment for Your Firm – In the current economic climate, raising capital is hard. No doubt about it. But it is not impossible. If you’re caught in a rut, check out this article and its five helpful techniques to raise some capital. Cutting Technologies – the author – used these techniques to raise £500,000 for laser equipment. Zap. 

The Perils of Investing in Private Equity’s Wake – Although private equity criticism is nothing special in the pre-election months, John Maxfield has done something different: criticized PE without mentioning Mitt Romney (well almost…). Citing debt and mismanaged capital structures, Maxfield frowns on LBOs and encourages investors to avoid any publicly traded portfolio companies. Does this apolitical scorcher indicate a newfound anti-PE sentiment?

Last week on Axial:
129 new Opportunities were brought to market

22 new Members joined the Axial Network
543 Pursuits by Members on active Opportunities