Reporting live from Dow Jones’ Private Equity Analyst Conference, I bring you, the PEA Highlight Reel. It’s a list of my own overly grandiose, somewhat informative and mildly irreverent takeaways from the first day of the private equity world’s Burning Man Festival. Enjoy:
“If you don’t accept that there’s at least a 25% chance of a financial markets-led depression, you’re fooling yourself” -Mark Patterson of MatlinPatterson.
“The sky is not falling” -Hugh MacArthur, Bain & Company.
FACT: AlpInvest’s CEO is not fooled by the term “proprietary.”
FACT: First Reserve calls each of its LPs once a month. Even chairman and CEO William Macaulay has a list of five or six LPs to ring up.
FACT: First Reserve’s Macaulay is an avid birdwatcher.
FACT: Macaulay has gone bird watching with Hank Paulson.
QUOTE: Birdwatching is a sexy hobby, according to the Wall Street Journal’s private equity reporter, Peter Lattman.
FACT: 70% of the world’s oil sits in the hands of national oil companies (Saudi Arabia, etc.)
QUOTE: There are two ways the US can reduce its dependence on foreign oil. Conservation and opening more off-shore drilling while developing renewables. “We’re not going to get self-sufficient. But we can mitigate,” Macaulay said.
FACT: There is a person asleep in the ladies bathroom.
QUOTE: Neither McCain nor Obama are particularly well-suited to save the economy, nor is does this crisis play to either of their campaign strengths, said Gerald F. Sieb, Executive Washington Editor at the Wall Street Journal.
FACT: High quality sponsor swag abounds.
SHOCK: Panelists from Lehman Brothers, AIG and Merrill Lynch actually showed up.
OF COURSE: Their companies demises were not discussed.
ALTHOUGH: One gallows joke was cracked by the head of Merrill’s leveraged finance, Greg Margolies. When asked, “Is it true that the balance sheet is king?” he answered with a smile, “so says the guy that just bought my company” referencing Ken Lewis’s famous 2001 statements that have now come to pass.
FACT: Despite the slated 25% drop in transactions and 60% drop in PE deal volume, 2008 will still be the 3rd or 4th largest year in the history of private equity, said MacArthur of Bain & Company
QUOTE: PE firms are fighting a war! For funds! And talent! And deals! According to MacArthur!
FACT: Only nine venture capital-backed companies went public so far this year.
FACT: Lenders are far more likely to commit to a deal that they can pre-market.
OVERHEARD: “This is not your father’s leveraged loan market.”
GIGANTIC QUESTION MARK: What does today’s news mean for AIG’s investment business? No one at the firm knew yesterday, but I have a pretty strong feeling about it today.
QUOTE: “We ain’t seen nothin’ yet,” according to the distressed panel.
OUCH: Panelist: “I have no opinion, as a banker.” Moderator: “One of the few left, apparently.”
QUOTE: CEOs of PE-backed companies need four qualities, said Bob Damon of Korn/Ferry. They are, (1) In constant communication with board, (2) has financial acumen, (3) a bias toward action, and (4) can do more with less.
QUOTE: On portfolio company managers: “I agree with a person who once told me, I don’t want anoher MBA, I want an FPG. The person explained to me that FPG stands for Focused Practical Genius,” said Tom Danis, RCP Advisors.
QUOTE: The corporate tax rate in Romania is only 10%; for other Eastern European countries it’s equally low. For this reason, a number of firms and businesses are moving their headquarters there, and an attractive shift of intelligence and human capital has occurred. This will only increase worldwide interest in Eastern Europe, said Shan Nair of Nair & Co.
FACT: While exit opportunities have shrunk in the US, they’ve vastly expanded in Asia, where the only option previously was an IPO. Now there are US and Asian strategics as well as Asian and European PE firms on the prowl for buys.
FACT: Private Equity Council President Doug Lowenstein is not dismissive of the SEIU-the group is getting some traction in their state pension-targeted campaigns, he said.
FACT: This is the first conference I’ve ever been to that showed a highlight real of “at the podium” and “networking” action shots at its own cocktail reception. We were reminiscing about the conference as it was happening!