Tuesday TalkBack


The sun is shining, the Red Sox are sinking and Iran is responding. In other words, it’s time for some Tuesday Talk-Back. 

*** First up are a couple of responses to yesterday’s column, which lambasted the Financial Times’ suggestion that LBO firms should consider buying Microsoft. Charles writes: “One thing I think that people may be overlooking is the ability of banks to underwrite and syndicate the necessary debt to complete an $80 billion LBO, or even $40-$50 billion one. There is a limited investor base for the high-yield bonds and leveraged loans that are necessary to complete these deals, and some of the larger-sized LBOs may already be testing the debt markets’ capacity. For instance, the HCA deal will represent one of the largest high yield bond executions and the largest term loan execution in history.” 

Hussein thinks I missed the point: “C’mon – it can’t really be true what they say about American’s not ‘getting’ irony. I read your piece attacking the FT’s article, and found it amusing that you were treating the tongue-in-cheek suggestions seriously. Or wait… were you actually being ironic yourself.” This was a common email yesterday, so I reread the FT piece a few times. Still think it was an absurdly sincere piece written in the fog of bubble. 

*** Lance on the issues of Form D regulatory filings: “You are absolutely correct that the formsare often filled out by outside counsel and before the fund-raise is completed… Whether a VC firm is raising a new fund or a company is undergoing a financing, these forms need to be filled out and include, among other points of information,the amount to be raised. It’s not uncommon to indicate an amount that indicates the absolute highest that could anticipate being raised. The reason for this is that if you indicate $x but raise $x+, you need to amend the filing to indicate the increased amount. Therefore, in order to try to avoid the time and legal fees that an amendment would require, many issuers provide the absolute highest amount of funds, but have no real expectation of raising that amount. 

It should be noted that a few issuers and their counsel have gotten more media savvy and have been willing to incur the cost of amendments to the filings in order to avoid the misperception that they missed their target. All that being considered, I do agree with you that its worthwhile for the media to include that info, but it needs to be taken with a grain of salt.” 

*** Steve on Crescendo Ventures: “It is hard to imagine that any LP, even dumb-money, would invest in a fund with only one key-man. This arrangement would suggest serious structural flaws in the firm, such as how the economics are distributed.” 

*** Last Thursday, I asked the following quiz question: There has been much (justified) hand-wringing over the absence of women in senior private equity positions. So can you name the newmiddle-market firmin NYC that is being headed up by a female duo? Hint: You don’t have to be Einstein to figure it out. Alex is the only reader to have correctly guessed: Relativity Fund, a New York-based middle-market/turnaround shop formed by Leslie Armitage (Carlyle) and Joyce Johnson-Miller (Cerberus). It is in the midst of raising its inaugural fund, which should bring in between $300 million and $350 million. 

*** Finally, Adam asks: “Nothing on Red Sox vs. Yankees?” Ummmm… See above, and go Patriots.