Private Equity Pink Slip Watch.
It’s been just two weeks since this space first broached the prospect of private equity layoffs, but that’s been enough time for them to evolve from anecdotal theory to systemic reality. Here are the latest examples:
* Behrman Capital has laid off most of its San Francisco office, and also made a pair of layoffs in its New York headquarters. The middle-market buyout firm declined comment, although we hear that managing partner Bill Matthes will keep the SF light on with at least one other investment professional (another SF pro is relocating to NY). Behrman raised $1.2 billion for its third fund in 2001, but has been struggling to get anywhere near that level for Fund IV.
* The Financial Times reports that 3i Group tomorrow will announce plans to cut 15% of its workforce, or approximately 100 employees. About half of these cuts would come in the UK, including a large number of back-office jobs like marketing and human resources.
* American Capital yesterday began the process of firing 110 employees and closing two offices. The publicly-traded firm is not identifying which offices are being shut, but we here that likely candidates include Boston and one of its remaining California satellites (probably Palo Alto). [Update: Palo Alto is indeed closed]. That could be bad news for the technology growth equity practice, which includes some venture capital plays. We also hear that the buyout teams could be let go in Chicago, with sponsor finance remaining. Lots of the pink slips went out yesterday, with more to come today.
We’re also hearing that at least two U.S.-based mega-buyout firms are holding internal discussions about firm-wide cuts. If you’ve got any info about the same – or layoffs at any other PE or VC shop – please drop a note or use our anonymous tipbox…
Jon Miller Still Not Buying Yahoo.
The WSJ reported yesterday that former AOL chief Jon Miller was asking private equity firms and sovereign wealth funds to help him finance an acquisition of all, or part, of Yahoo. This came just days after a UK report that Microsoft would buy Yahoo’s search business, and put Miller and Ross Levinsohn – former Fox Interactive president and Miller’s current partner at VC firm Velocity Interactive Group – in charge.
Both reports appear to have been bogus, based on subsequent reports and conversations I’ve had with knowledgeable sources. As such, three points:
1. Velocity is in the midst of raising its first fund since Miller and Levinsohn joined late last year, so it’s no surprise that the pair is talking with funding sources. At its annual LP meeting last month in California, Velocity told investors that it had already secured some capital commitments — mostly from corporations and foreign sources – but that it still has a way to go.
These two Yahoo stories, however, add a heavy burden to future fund-raising. Not only must Miller and Levinsohn navigate the most stagnant LP waters in memory, but they also must fend off nagging accusations of wanderlust. This gets even trickier with Miller not making any public statements, due largely to the continued presence/enforcement of his non-compete agreement with Time Warner (note: Miller didn’t even provide a quote to the original press release announcing that he had joined the firm).
2. It would not at all surprise me if Miller talked with Yahoo. Why? Because before joining Velocity, Miller and Levinsohn wanted to form a PE-backed Internet rollup that largely failed because of inflated valuations and inflated CEO egos. The air has been let out of both, which makes it likely that Velocity would evolve from an early-stage VC shop to a more diversified fund that cares less about a company’s age than its potential. As such, there could be non-core pieces of Yahoo – or of other companies — worth buying. Remember, Velocity was part of the CNet buyout attempt (even though it didn’t actually put in any money).
3. Yesterday’s WSJ report goosed the value of Yahoo stock, which raises the obvious question of stock manipulation. Mike Arrington suggests that the SEC should begin asking questions, and I think the WSJ should as well. If WSJ editors determine the paper was intentionally deceived, it should divulge the offending sources. We journalists provide confidentiality to protect, not to help cover up.
Last Call for Internship Rodeo Postings.
Friday marks the beginning of our 6th Annual Internship Rodeo, which helps investment firms find first-year MBA candidates for summer internship. This is a free service open to most any type of firm, including VC, LBO, LP, I-bank, Mezzanine, Consulting, Funds-of-Funds, etc.
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If you are interested in posting an available position,please do so today by emailing me at daniel.primack@thomsonreuters.com.
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Please include your firm name, job location and type of business (i.e., VC/LBO/etc.). Also include any additional information you would like posted, including a contact email address for applicants. If you would prefer me to create an anonymous email account for you, just let me know. Your firm name will be kept confidential, unless you specifically request it to be disclosed (which about 50% of firms requested last year). There is no requirement that participating firms hire via the program.
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The listings will be posted Friday in the peHUB MBA Forum, an online message-board only accessible to MBA candidates. It currently has over 1,000 members, and that’s sure to grow once word of the Rodeo gets around. So please get me your information ASAP. We’ve placed over 350 summer interns via this program, and many have gone on to fulltime employment at their internship site following graduation. Suffice to say, this year it will be a “buyer’s” market…
Carlyle Group Laying Off 10%, Closing Menlo Park Office.
Earlier today, I wrote about “hearing that at least two U.S.-based mega-buyout firms are holding internal discussions about firm-wide cuts.” One of those firms was The Carlyle Group, which is now confirming a WSJ report that it will cut 10% of its workforce and close its Menlo Park, Calif. office.
“In response to extraordinary market conditions, Carlyle has taken measured steps to balance its cost structure with the current investment climate,” says Carlyle spokesman Chris Ullman. “The firm is well positioned to take good care of our investment portfolio and has the resources to create and respond to compelling investment opportunities.”
The decision will result in approximately 100 layoffs, which comes on top of Carlyle’s moves last month to close both its Warsaw office (10 staffers) and its Asia leveraged finance team (7 staffers). A majority of the affected employees work in the back-office, but dozens of investment professionals also are being let go. All laid-off employees will receive severance packages.
Carlyle only opened its Menlo Park office this past January, for two reasons. First was to give its tech buyout team a Silicon Valley presence, and second was to expand Carlyle’s venture and growth capital activities. Carlyle managing director Todd Neunam was in charge of the first part, but ultimately returned to DC to lead the firm’s industrials group. Carlyle subsequently initiated a search to hire his replacement, but those plans have obviously been shelved.
As part of the growth and venture capital expansion, Carlyle hired managing directors Nick Sturiale (formerly with Seven Rosen Funds) and Greg Rossmann (Pequot Capital), plus principal Jeb Miller (ComVentures). Since then, however, just two of that practices 15 deals have been for West Coast companies — an imbalance that helped precipitate the office closure. It also didn’t help that Menlo Park was one of Carlyle’s newest offices, and that most of its staffers had been hired after the group closed its third fund in Q3 2007 with $605 million (40% invested to date).
Sturiale, Rossmann and Miller have all been laid off, as have two other growth equity team members in Menlo Park. The office’s U.S. leveraged buyout staff will be relocated.
Carlyle plans to maintain its small San Francisco office, but likely will relocate it to more modest digs.
2008’s Most Active Deal-Doers.
The ability to source a deal isn’t much to brag about these days, with only the rarest of deals actually getting completed. Look no further than Carlyle Group, which is laying off 100 employees, a including a number of its deal team members, for proof.
The decline in deals is apparent in a report released by PitchBook Data:
For the first three quarters of 2008, there were 1,302 completed deals, a 33% decline from the 1,936 deals over the same period a year ago.
Still, 1,302 deals is nothing to sneeze at, and there are plenty of firms out there striking deals, just at a much, much slower pace than, say, two years ago. I believe the phrase I keep hearing is “Ten times more work for one tenth of the results.”
In the report, PitchBook lists the top 50 most active private equity firms year to date. Guess what? Layoff-burdened Carlyle Group is listed as number three! (However I think they’ve now been passed by Sun Capital, as the firm told me it’s done 23 deals this year, not 19 as PitchBook reports.) Follow the jump to see them all.
Investor Name Deal Count GS Capital Partners 32 Warburg Pincus 26 The Carlyle Group 21 Sun Capital Partners 19 The Riverside Company 19 Audax Group 18 H.I.G. Capital 18 The Blackstone Group 17 Lindsay Goldberg 17 TPG Capital 17 Marwit Capital 15 Parthenon Capital 15 Bain Capital 15 Kayne Anderson Capital Advisors 14 American Capital Strategies 14 Weston Presidio 13 Summit Partners 13 Silver Lake Partners 12 Allied Capital 12 Providence Equity Partners 12 Veronis Suhler Stevenson 12 Wind Point Partners 11 Hellman & Friedman 11 Lake Capital 11 Banc of America Capital Investors 11 Arlington Capital Partners 11 ABRY Partners 10 First Reserve 10 GTCR Golder Rauner 10 Housatonic Partners 10 Riverstone Holdings 10 Pegasus Capital Advisors 10 Welsh, Carson, Anderson & Stowe 10 CI Capital Partners 9 Kohlberg Kravis Roberts 9 DLJ Merchant Banking Partners 9 Gryphon Investors 9 Monomoy Capital Partners 9 Equity Based Services 9 KRG Capital Partners 9 Nautic Partners 9 Wachovia Capital Partners 9 Kelso & Co. 8 Apollo Investment Management 8 Fidelity Equity Partners 8 Sterling Partners 8 Centre Partners 8 Harbert Management 8 Huron Capital Partners 8 Peninsula Capital Partners 8
Pennsylvania SERS “Tables” Fund Commitments.
The Pennsylvania State Employees’ Retirement System today met to discuss commitments to four private equity funds, but left without taking any action. This is a highly-unusual move for the $29 billion pension system, particularly given that each commitment would have been with an existing fund manager.
The funds up for consideration were: Hellman & Friedman Capital Partners VII, TL Ventures VII, Lime Rock Resources II and Novitas Capital IV.
SERS spokesman Bob Genzel said that a final decision on each fund has been “tabled due to the uncertain market environment,” but that no future date was set to revisit the issue. The board next meets on January 28.
When asked if the lack of action was due more to uncertainty in the private equity markets or in SERS’ own capital position (it lost nearly 13% in Q3), he said “all of the above.” He also said that the system had not pursued any sales of existing private equity positions on the secondary market.
Sun Capital Bucks Layoff Trend, Plans to Hire.
The recent spate of reported layoffs are generating fear in the minds of PE pros everywhere, except in the halls of one firm, which is actually hiring. That firm is Sun Capital Partners.
Known as a turnaround investor, Sun has plans to hire one managing director in Europe after recently hiring VP there and moving a few employees to London, a source told peHUB. Likewise the firm plans to hire two more operating partners and a few more deal associates in the US.
It makes sense, since we’re entering an investment cycle that favors the turnaround model. Sun Capital, with 90 portfolio companies, already has a labor-intensive model, and plans to have a busy year next year. The company came in fourth place for number of deals done in the first three quarters of the year, racking up 19 (the total to date is 23). As the economy continues on its southbound route, the amount of dysfunctional companies, or buying opportunities, will only increase.
“When [Cisco CEO John] Chambers was paying the prices he was back in ’99, an acquisition was a good out. Today, a private sale doesn’t get us the returns we need to make us attractive to LPs as an alternative asset class.”
–Joe Schoendorf, a venture partner at Accel Partners, speaking both about the venture industry and specifically Accel — which turns 25 this month — at today’s AlwaysOn conference in Half Moon Bay, Calif.
Elliot Spitzer Has A New Job: He’s now an online columnist for Slate. This is sure to generate giant eyerolls and tons of begrudging readership. Brilliant marketing move for the online magazine, I say.
Winner: Neuberger Berman has sold to, itself! Management and senior employees won the auction.
Realogy: What its basement level bond prices mean for the company’s solvency.
Leaked: Kleiner Perkins accidentally published 588 iFund Applications online. Shouldn’t VC guys have their sh*t together on tech-y stuff like this? Either way, big oops.
Truckin: The Big Three CEOs had to drive to their hearings this time, after outrage over the whole private jet debacle. Dealzone suggests some roadtrip tunes.
Vying Aggressively For Relief: Nonbank firms are, that is. WSJ.
Bad Bets: That whole casino sector isn’t looking so hot these days: “Real estate values have fallen substantially, and descending revenue, high debt loads and limited refinancing options are putting many gaming companies in a bind,” Dealscape reports.
Big, Big Exit: Temasek sells PowerSeraya for $2.5 billion.
Love It: Dealscape explores “the depressing scramble to name the recession.”
Sweeping Generalizations: PE Database lays out what PE firms look for in acquisition targets. I can’t say all of these (”growth potential,” “strong management”) are surprising or, taken together, could possibly apply to anything but your most generic middle market generalist, but it might be a good primer for unsophisticated sellers, if there are any left (doubtful).
$8 billion in four months: I know you know, just thought it bore repeating.
Rubenstein: Not only is he laying off but he’s predicting bad things for hedge funds and PE.
Think Things Are Bad Now? Just Wait, Says Morgan Stanley Honcho.
Think things will start to turn around in the second half of next year? Hah, good one. So suggested Colin Stewart, the vice president of capital markets at Morgan Stanley, earlier today at the AlwaysOn conference in Half Moon Bay.
“I wouldn’t want to delude you,” said Stewart to an audience of roughly 50 attendees, many of whom looked like they would have been perfectly happy being deluded. The global economy’s situation is such that it’s “not just another six months and it will get better,” said Stewart. “I’m not very sanguine about next year. I don’t think there will be a meaningful recovery in the second half. I think 2009 will be very challenging for investors, companies, and consumers.”
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Stewart wasn’t a total downer. He’s apparently been spending a substantial amount of time visiting sovereign wealth funds and “other pools of capital out there,” and said that at tech companies in particular are now “on the radar screen of people who wouldn’t look at them before because of their high multiples.”The dollar probably won’t depreciate meaningfully either, said Stewart, because of the fiscal stimulus packages being implemented across the globe. “[The dollar] has appreciate 20 percent versus the euro over the last couple of months,” he observed, adding, “while it feels bad in the U.S., it’s quite bad elsewhere.”
Stewart also observed another “silver lining” surrounding the gloom cloud under which we’re currently living: oil prices that are allowing people to pocket half what they were paying to fill their gas tanks six months ago. Unfortunately, Stewart went on to remind everyone that prices will “climb the wall again” and that “the longer term future is very high energy prices.”
Stewart positioned the news as good, saying that high energy prices create opportunities for alternative energy entrepreneurs and investors, and in that moment, I thought I saw a smile cross the face of an audience member.
Then Stewart ruined everything by talking about deflation. “I think it’s a real risk for 2009,” he said. “Things will get worse before they get better.”
Refresh.