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Highlights:

– Restrictive Leveraged Lending Guidelines for Europe
– In Praise of Stock Market Activists
– Making the PE Workplace More Family Friendly
– Chinese VC is More Welcoming to Women
– The Most Influential Firm in Silicon Valley
– PE KeyTrends Quick Question Results



LEVERAGED LENDING GUIDELINES MAY RESTRICT EUROPEAN BUYOUTS.
Real Deals reports that the European Central Bank “is on track” to propose guidelines by year-end “that will mirror” restrictive U.S. policies introduced in 2013. Those guidelines, which require U.S. banks to submit for regulatory examination all leveraged loans where debt exceeds six times the cash flow of the acquired company or asset, have depressed the volume of credit-fueled buyouts. Any similar guideline in Europe could play a greater role holding back leveraged buyouts than is the case in the U.S. For the moment, there are fewer non-bank lenders in Europe to stand in for banks, though the introduction of restrictions on leverage may lead to the rapid growth of such capital pools. Lower debt levels make it harder to achieve exceptional returns in buyouts.

REAL DEALS



BLACKSTONE ADDS TO THE CHORUS PRAISING STOCK MARKET ACTIVISTS.
Joe Baratta, head of global private equity at Blackstone, the world’s largest PE manager, notes in a Bloomberg story that “lots of public-company CEOs are receptive to conversations” with PE firms due to pressure from stock market activists pushing for corporate change. Baratta is the most recent PE manager to discuss the symbiotic relationship between stock market activists and PE acquirers. Blackstone “applauds the activist investment community that’s out there making [chief executive officers’] lives more difficult and making them have to account for how the business is being governed,” crows Baratta. Public company CEOs under activist onslaught are usually more open than they would otherwise be to PE takeovers. Such deals also crystalize value for activists. Two of the most recent PE deals “initiated by shareholders agitating for change” include Vista’s $1.6 billion purchase of network security provider Infoblox and Blackstone’s $820 million investment in automated teller machine maker NCR Corp.

BLOOMBERG



KKR MAKES THE PE WORKPLACE MORE FAMILY FRIENDLY.
At KKR women account for 18 percent of the firm’s 510 core investment professionals. Like many private equity firms, the mega manager wants “to attract and retain more talented women,” writes the Wall Street Journal. It also aims to promote “meaningful parental leave” for fathers. So, it’s “experimenting with some unusual perks” that may become a model for other PE firms. As of last year, KKR pays “to fly nannies and infants on business trips;” packages maternity and paternity leave as a gender-neutral ‘parental leave’; “pays shipping costs so mothers can send breast milk home”; offers a month more paid leave for primary caregivers (extending it to a total of 16 weeks); and bankrolls “unlimited coverage for fertility treatments.” The firm is also “allowing some employees to work more from home” and “developing alternative career paths for those who may not want to pursue the partner track.” The benefits are welcome, particularly given “a norm” of a more than 70 hour workweek – not something KKR is looking to reduce.

WALL STREET JOURNAL



CHINESE VENTURE CAPITAL IS MORE WELCOMING TO WOMEN,
observes Bloomberg. The largest venture capital fund raised by a woman – H Capital – is in Beijing and has $1 billion in assets under management. Run by former librarian Chen Xiaohong, it’s about twice the size of the largest woman-led fund in the U.S. “Chen and her peers have become part of the mainstream in China in a way that’s proven elusive” in the U.S., where firms “have faced accusations of sexism and discrimination for years.” In Silicon Valley, women account for 10 percent of investing partners. In China, “about 17 percent of investing partners are female and 80 percent” of firms “have at least one woman.” While China is “hardly free from discrimination,” Chen and her peers “are building on a tradition of opportunity” that dates to at least the days when Mao Zedong proclaimed women hold up “half the sky.” Women worked “when the country was poor, and fought alongside men during the country’s civil war. By comparison collaborating in an office is simple.”

BLOOMBERG



THE MOST INFLUENTIAL FIRM IN SILICON VALLEY IS Y COMBINATOR –
at least you might think so after reading an 11,423-word New Yorker opus profiling the firm and its president since 2014, Sam Altman. Since 2005, when Y Combinator was founded, “accelerators have sprung up everywhere,” transforming “startups from skeins of code into bonafide companies.” “In exchange for 5 to 7 percent of a startup’s equity,” accelerators offer “$15,000 to $100,000, advice for an intensive three-month period, introductions to mentors, and a Demo Day where investors assess the finished product.” The value of YC’s investment portfolio, which has funded Airbnb and ten other companies that are worth $1 billion or more, is $80 billion – a 17-fold increase in five years. Says thirty-one year-old Altman: “Enough people view YC as important that if we say, ‘we’re super excited about virtual reality,’ college students will start studying it.” Writes the New Yorker, not without a touch of skepticism: Altman is “building out an economy within Silicon Valley that seems intended to essentially supplant Silicon Valley – a guild of hyper-capitalist entrepreneurs who will help one another fix the broken world.”

NEW YORKER


AND NOW THE RESULTS OF SOME OF OUR RECENT KEYTRENDS QUICK QUESTIONS:

  • 70 percent of respondents say that prolonged high pricing for mainstream buyout investments will lead to significantly more money invested in esoteric private equity assets.
  • 57 percent of respondents believe an uptick in secondary transactions in the second half of the year will lead to another year of record secondaries volume.