Is This New York? No, It’s Iowa

Last week, this space reported that Sen. Chuck Grassley (R-IA) was considering legislation that would result in increased taxes for the private equity industry. Part of the pretext was that Grassley has particular leverage because such a move was unlikely to ruffle any feathers in his home state of Iowa. After all, how often have you heard a buyout firm say, “We have offices in New York, London and Des Moines.”

But that may be changing. Iowan companies are receiving record amounts of private equity funding, and the state is shooting past other more traditional disbursement destinations. According to data from Thomson Financial (publisher of peHUB), Iowa ranks 31st in amount of private equity received since the beginning of 1990. It was even worse in 2005, when it came in a number 35.

But that was then, and ethanol is now. Iowa ranks 12th since the beginning of 2006, ahead of such states as Virginia, North Carolina and Colorado. It’s important to note that this ranking is about the number of dollars rather than the number of companies, but it’s nonetheless an important indicator that investors are doing more than just flying over Hawkeye country.

Moreover, I may have been too cute with that “ethanol is now” comment. Only two private equity deals in Iowa since the beginning of 2006 involve ethanol: Hawkeye Holdings and Renewable Energy Group. The state’s second largest deal over that time period was General Atlantic’s $1.2 billion acquisition of a 52% interest in Emdeon Business Services, a Waterloo-based provider of revenue cycle management and clinical communications solutions that enables payers, providers and patients to improve healthcare business processes. Others include Carlyle’s purchase of party supplies company Oriental Trading and Gryphon Investors’ deal for temp provider Staffing Now Inc.