Good morning, Hubsters. MK Flynn here on the Wire.
Top of mind today: the SEC’s proposed rules and how they may affect the private equity industry.
“The Securities and Exchange Commission crossed a threshold Wednesday that could take it into new territory in its efforts to regulate private equity,” writes Chris. “The commission proposed rules for the first time that would outright ban certain practices – a move away from the commission’s traditional focus on making sure GPs are providing LPs with appropriate disclosure.”
As Chris writes, “The rules are written broadly and could capture practices not intended to fall under the scope of the rules, according to Igor Rozenblit, managing partner and founder of consultancy Iron Road Partners.” Rozenblit is the former co-head of the SEC’s private funds unit.
‘There are many vertically integrated managers who allocate services using a methodology other than time for services performed, which may be viewed by the commission as falling outside of the ‘unperformed work’ prohibition of the rule,” Rozenblit said. “Changing the allocation for those managers would be very expensive and lengthy.”
Some larger firms are taking the proposed SEC rules in stride. “I think the level of regulatory scrutiny of our space is probably a positive for larger players that are more institutional,” KKR co-CEO Scott Nuttall said on the firm’s earnings call earlier in the week, Kirk reports.
I reached out to the American Investment Council for the advocacy group’s reaction. “The private equity industry supports transparency and disclosure, and we work closely with our investors to ensure they have the information they need to make the best investment decisions,” said Drew Maloney, AIC president and CEO. “We are concerned that these new regulations are unnecessary and will not strengthen pension returns or help companies innovate and compete in a global marketplace.”
We’d love to hear what you think of the proposed SEC rules. How will they affect your PE firm? Will the rules foster necessary transparency, or create an undue burden on PE firms, especially smaller ones? Send us your take by emailing me at email@example.com and Chris at firstname.lastname@example.org.
And for more analysis, see Regulatory Compliance Watch’s ongoing coverage, including this story by Bill Myers. We’ll continue covering the issues and reactions throughout our publications.
Pharma Intelligence. One deal announced this morning that caught my eye: Warburg Pincus has acquired Pharma Intelligence, a provider of specialist intelligence, data, and software for clinical trials, drug development and regulatory compliance, from Informa. Mubadala Investment Company joined Warburg Pincus in the investment. ‘’Pharma Intelligence is an increasingly important company with tremendous growth potential,” Adarsh Sarma, co-head of Europe, and Chandler Reedy, head of strategic investments at Warburg Pincus, said in the press release. “We believe that demand for its services will increase as the world becomes more data driven and focused on using predictive analytics to solve health issues and major diseases. As one of the world’s largest investors in pharma, health tech and B2B information services, Warburg Pincus is uniquely placed to help the company achieve its growth potential.”
Thought leaders. Looking for insights on today’s dealmaking landscape? Check out my ongoing series of Q&As with high-profile private equity professionals, including:
• Pam Hendrickson, vice-chairman of The Riverside Company
• David Grain, founder and CEO of Grain Management
• Brent Gledhill, CEO and president of William Blair
• Beatrice Mitchell, co-founder and managing director of Sperry, Mitchell & Co.
• Robert Reifman, managing director, Lincoln International
• Randy Schwimmer, co-head of senior lending at Churchill Asset Management and founder and publisher of The Lead Left
40 under 40. Private Equity International is calling for nominations for its fourth annual rising stars of private equity list. PEI’s 40 under 40: Future Leaders of Private Equity will be published online and in the Future of Private Equity Special in early May. Submit your nomination by end of day Thursday February 17 here. The list will feature individuals across five categories: Investor (LP); Fundraiser; Dealmaker; Lawyer; Operator.
Last chance. Time is running out to send in nominations for Buyouts’ Deal of the Year Awards. We’ll pick winners in seven categories: Deal of the Year, Large-Market Deal of the Year, Middle-Market Deal of the Year, Small-Market Deal of the Year, Turnaround of the Year, International Deal of the Year, and Secondaries Deal of the Year. The deadline is tomorrow, Friday, February 11. Send in your candidates ASAP to Chris at email@example.com. And visit here for more info about the awards.
That’s it for now.