Live from San Francisco…

Greetings from Buyouts West, which is set to begin in just a few minutes. I don’t have to do any speaking until tomorrow, which means I’m free to sit in the back of the room to do some live-blogging. First up will be a keynote from Hartley Rogers, chairman of Hamilton Lane…

* Ok, here we go… Beginning with a general market overview. Says: “Not even we understood just how much leverage was being used.” And no one laughed. Apparently not a joke…

* I think that we may have already found a theme for this year’s conference: Mortgage lenders screwed us!

* Maybe instead of the wine-tasting we’re having later, we could actually sponsor “Slap a subprime lender,” or perhaps a dunk-tank. A lot of those folks could use a paycheck, and it really would be cathartic…

* Rogers uses term “megadeath” to describe the post-July 4 end of mega-leveraged buyouts. I wonder if Dave Mustaine will sue for copyright infringement…

* Estimates $15 billion in actual loan losses related to LBOs.

* Now seems to be a good time to relay rumors that Hamilton Lane has shut down one of its smaller business units. More on this later…

* Believes public markets will stay strong, due to strong corporate profits. Doesn’t mention possibility of a recession, but apparently is not expecting one. Strong public equity markets typically prompt strong private equity markets.

* Barry Gonder of Grove Street Advisors is here, to speak on the LP panel that follows Rogers. Great guy, who doesn’t usually return my calls. That’s why I like seeing him here, and ocassionally in the supermarket.

* On to Q&A. First question is on return expectations. Rogers says HL expects 300-500 BP over applicable index. Says bigger funds will likely produce smaller IRRs over next few years (300-400 BP).

* All done, LP panel begins shortly.

* I just asked Rogers about the aforementioned rumors, which have to do with Richcourt — a hedge fund-of-funds manager that Hamilton Lane bought a majority stake in from Citgo back in 2004. He said that Hamilton Lane has reorganized the unit, not closed it. This means that the high-net-worth and European business has been sold back to Citgo, while Hamilton Lane will continue to operate the institutional business. Come for the live-blogging, stay for the scoops…

* LP panel begins. Buyouts editor David Toll is moderating, and recently did an in-depth analysis of pre-2003 buyout funds returns from public LPs. He is going to ask each LPs if they can guess some median IRRs and return multiples. So you know, I bombed when he asked me. Apparently my generosity cup runneth over.

* Ok, this is kind of dragging. I’ve just tapped my third Diet Pepsi. Come on David, ask the obvious question: Will LPs negotiate harder on GP-friendly LPA terms, so as to protect themselves when the next bubble goes boom. Or why they keep committing to mega-funds (Bain, Maadison Dearborn, etc.) when there aren’t mega-deal opportunities.

* While I keep waiting for someone to say something interesting, let me take this moment to remind you that I’ll be both moderating a panel tomorrow, and also participating in “The Great Debates.” And, lucky for me, no one will be snarkily blogging my efforts. Apparently Mark Cecil will do some blogging honors while I’m moderating.

* Macquarie’s Peter Martenson says they use a 1.75x return basement.

* Return guessing game begins. Can you guess median investment multiples and median IRR for Toll’s sampling of pre-2003 buyout funds. Peter Martenson guesses 16% median IRR and 1.6x median return. Jaime Hale of Oak Hill Capital Management guesses 15-16% median return and 1.5-1.6x median multiple. Both cited sample bias…

* And the answers are: 23.2% median IRR, and 1.6x median return. Also, 12% of the sample have not yet returned their LPs’ principal.

* Big kudos to The Fairmont San Francisco, for having working WiFi in its conference ballroom. So rare, so helpful.

* Peter Martenson asks if the global economy will continue to be tightly interlinked with the U.S. economy, or will it delink a bit…

* I got a Q in about LPs backing ever-growing megafunds, while simultaneously predicting a decline in mega-buyout opportunities. The general reply was to bow at the portfolio diversification alter, although Barry Gonder hit closer to the truth. He said that the LP community is bifurcating, and that certain public LPs need a place where they can invest large sums ($100m-$400m), and at least top the public markets by a few basis points. Not a good development, but a development nonetheless…

* Following the panel, Tom Bradley of Pomona made an additional comment — VC funds were over-subscrlibed after the tech bubble burst. I asked if he thought they’d give some of the money back if deals didn’t materialize. He just smiled, which I took to be a “no.”

* Seems I’ve missed most of the lending panel, while out in the hallway chatting. Apologies. On the other hand, I got some pretty good info out of it, which I should be able to share later this week. Be back blogging once Alec Gores begins, in about an hour…

* Back in the saddle. Alec Gores, founder and CEO of The Gores Group, to be interviewed by Mark Cecil of Buyouts Magazine. Gores apparently flew in from Europe, and plans to fly right back.

* Gores was born in Israel, and retains the accent. But when he says “Minnesota,” he sounds like he was reared in Duluth.

* Gores “sees ponies where others see pigs.” I tried playing the analogy out in my head, and it actually works pretty well.

* Gores once bougght a word processing company callled NBI, which had a toll-free number 1-800-Call-NBI. They noticed that they got lots of calls from folks looking for MCI, since their number also spelled 1-800-Call-MCI. AT&T came in and bought the phone number — for 3x what Gores had paid for the entire company!

* Gores just broke the obscenity barrer for Buyouts West, with a well-positioned “shit.” Good, makes my job much more comfortable tomorrow. Also glad I have a seat… Standing room only at this point.

* Gores’ firm has never had a portfolio company bankruptcy, or situation in which a lender has “lost a dollar.”

* Says he prefers carveouts to buying from private owners, because “private owners can run companies better than we can.”

* Next up is the “West Coast LBO” panel, even though one of the panelists is based in New York. Probably better titled: “Tech LBOs.”

* Jeremy Harrell of Buyouts is moderating (he’s really tall). Panelists are Chip Schorr of Blackstone Group, Frank Do of American Capital Strategies, Dipanjan Deb of Francisco Partners and Alex Slusky of Vector Capital.

* New conference rule (for all conferences): Don’t let panelists introduce themselves. Takes forever, and most of the info can be found in the delegate book. Also, speakers/panelists need to turn off cell phones. Not the ringer, but the actual phone. It causes static on the mikes.

* I think Deb just said that Sequoia Capital is the single largest investor in Francisco Partners. Pretty sure I heard that right… Interesting.

* Talking about going-private transactions, which Deb calls one of the credit crunch’s first casualties.

* Blackstone’s Schorr: “Leverage is available. We have situations we’re looking at where financing is available. What’s changed is that we’ve reset to around 18 months ago… a very comfortable time when deals were getting done.”

* Alex Slusky: “The next 12-18 months will not be a good time to be a private equity investor.” Deb agrees, and thinks we’re headed for a recession. Maybe a muted recession, but a recession nonetheless. Schorr is a bit more bullish.

* Slusky says that there aren’t too many stand-alone tech value targets. Companies are either effecient, or still trading at pre-baked acquisition prices.

* Deb just referred to a company’s whose past management was “running it into the ground.” Also said he and Schorr were just on a board call with said company. Two in common: AMIS Holdings and MagnaChip. Got a guess? 50/50 chance…

* Slusky says that 40% of Vector’s deals, historically, used no leverage.

* Ok, that’s all for today. Time to taste some wine. Hopefully do some more of this tomorrow when I’m not on stage… Thanks for reading.