What is a private equity firm to do in the current leverage constrained market? The days of bidding up the prices of profitable and growing businesses in robust auctions -- fueled by stapled financing featuring PIK/toggle covenant light terms at 7x EBITDA -- are a thing of the past. The debt crisis has largely eliminated the availability of debt financing for LBO transactions, and owners of healthy businesses are holding their properties off the market rather than attempting to gain liquidity against the headwinds of wounded private equity buyers and introspective lenders. Obviously, many private equity professionals are devoting a significant amount of their time and energy nursing the hangovers in their own portfolios from many of these deals. But for the more intrepid PE professionals with dry powder, there may be an opportunity to pick through the carnage created by the debt bubble of the early part of this century and turn some of the lemons into lemonade. The auction process in this new world order may be in the form of sales pursuant to Section 363 of the Federal Bankruptcy Code.
For the first time in 30 years, the automotive market is wide open for innovation and market share gains. So wake up Detroit, and give us a 500,000 mile car that can be easily serviced, and which comes with a warranty linked to a service contract. Once upon a time the most innovative car in the country was the 1967 GTO. Designed by famed cocaine dealer John DeLorean, the GTO was a quantum leap in driving fun delivered by putting a huge engine on a relatively light chassis. I was driving one of these beauties in the 70’s, when along came an “Oil Crisis” and a stock market crash. The fat gasoline prices and skinny paychecks of the 70’s opened the US car market to strange little cars from Japan that were far from perfect, but cost an order of magnitude less to own than their Big 3 competition – they cost less to buy, less fill the tank and less to maintain. They even had slower deprecation rates because their value proposition was durable. Toyota, Honda and Nissan didn’t deliver a quantum leap in technology, but they did deliver a quantum leap in value proposition.
For as long as I can remember, I have been an enthusiastic participant in sports. To be clear, I'm not a great athlete (in fact, I'm the only one of Flybridge's five general partners that wasn't a varsity athlete in college), just good enough to participate passionately and aggressively like the prototypical weekend warrior. During any of my amateur sports efforts -- whether competing in mini-triathlons, tackling hard ski runs or trying to jump the wake while Water-skiing -- I've always enjoyed pushing myself and approaching the task fearlessly. This week, for reasons that will become clear shortly, I was reflecting on why it is that I am so fearless as a competitor, even as I've gotten older. I came up with two reasons. First, I'm not afraid of losing or failing and, second, I'm not afraid of getting hurt. The former is probably because winning has never my ultimate objective, but rather the fun of competing and the enjoyment of achieving some level of mastery. And I've probably never been afraid of getting hurt because I've never gotten hurt. I've been simply very lucky. That is, until 6 weeks ago when a collision during a Saturday morning pick-up basketball game caused my ACL tendon to rupture. My luck ran out.
You are a lawyer. You represent a hot start up that is venture-backed. One day the CEO comes to you - out of the blue - and says "you're fired." (Cue Donald Trump frown). You've stuck it out through the lean times with the company even when they weren't funded and now you are on the outside looking in. What gives? It must be the evil venture capitalist (me). He must want one of "his guys" at the legal helm. Not so fast. Even ex-lawyers like me who believe we can evaluate the best of legal talent don't take this action lightly. And I never like to have a heavy hand with my CEOs. It's their company to run and I work for them. I, however, have seen some unbelievably stupid things that company counsel lawyers have pulled that has ruined their credibility with the VC (me) and thus found their way out the door, either by my strong urging, or by agreement of the entire company.
Investment banking is going through its most severe dislocation since the Great Depression. The economic turmoil during the 1930s led to the Glass-Steagall Act, which separated investment banks from commercial banks and also introduced new regulations to protect the monetary system. Congress repealed much of Glass-Steagall in 1999. And now, a decade later, it’s all […]
That first telephone interview is your one chance to convince the interviewer to invite you in for an in-person interview. There are no “do-overs”, so concentrate on making a great first impression.
The past ten years have dampened the fun of being a small cap public company. Increased regulatory efforts, such as Sarbanes Oxley, have escalated the cost of being public. With the growing threat of litigation, the risk to management and directors has increased. Research and trading support, vital to gaining broad institutional support, has become […]
It used to be that anyone in the entrepreneurial world had to be keenly cognizant of what was going on in New York City. If you were funded by VCs in Silicon Valley, Boston or Bombay, it still paid to have your CEO and sales team keep eyes and ears in NYC. My how things have changed. New York City feels increasingly irrelevant to most startups as both a source of customers and large amounts of capital. Instead, Washington DC has in many ways become the New, New York.
Everything I know about management I learned from The Godfather. At its core, business is quite simple. The goal of any organization is to upset the status quo and then re-establish it on a more favorable basis. Of course, all your competitors are trying to do the same thing. The world of business is inhabited […]
Plain common stock has become largely worthless in funded companies. Preferred shareholders have increased their rights and protections, while liquidity events have become rare. Meanwhile, common stock has remained largely unchanged, having value diminished by the changing world. There is an argument that creating value in common stock may help to improve returns from private […]