Private equity powerhouse, The Carlyle Group, has more than 500 investment professionals across 21 countries. Of course, some of them are corporate luminaries like Louis Gerstner.
Well, after being the chairman of Carlyle since 2003, he is now departing -- his last day will be September 30th. Although, he will remain as a Senior Advisor to the firm.
Gerstner has had a stellar career. In 1993, he took the challenge of becoming IBM's (NYSE: IBM) chairman. At the time, the company was crumbling.
Before his tenure at IBM, Gerstner was the CEO of RJR Nabisco, where he had to deal with the debt-load from a mega leveraged buyout (from KKR). He was also the president of American Express (NYSE: AXP) and a director of management at McKinsey & Co., Inc.
While at Carlyle, Gerstner made a big impact. He helped globalize the firm as well as diversify the investment base. As of now, Carlyle manages about $75 billion in assets across 57 funds and controls a portfolio that has aggregate revenues of $87 billion.
GSTrue, which is operated by Goldman Sachs (NYSE: GS), is a new-fangled marketplace to trade privately-held interests. One of its high-profile listings is Apollo Management LP., a top-tier private equity firm.
Unfortunately, the shares have lost more than 40% over the past year. Of course, this has been the treatment for many other private equity players because of the severe credit crunch.
According to the latest quarterly report, Apollo suffered a loss of $96 million, compared to a net profit of $144 million in the same period a year ago. The internal rate of return (IRR) fell from 42% to 21% over the quarter.
Moreover, Apollo is involved in litigation on its botched deal for Huntsman Corp (NYSE: HUN). And there was a 20% write down on the investment in Harrah's.
Despite all this, Apollo still appears to be on track for an IPO – to be listed on the New York Stock Exchange. Don't expect it to be easy.
With surging energy prices, investors have been pouring huge sums into alternative energy and cleantech deals. For example, according to a recent survey from Ernst & Young/Dow Jones VentureSource, venture capital investments in the category have surged 83% to $961.7 million in Q2.
Well, private equity shops also want some of the action (especially since buyouts continue to remain fairly dormant). That is, the Blackstone Group LP (NYSE: BX) has established its Cleantech Energy Group.
The chief of this division will be James D. Kiggen, who certainly brings some nice credentials. He was the senior vice president at AllianceBernstein L.P, where he analyzed emerging technologies. He also structured investments in a variety of cleantech companies, like A123Systems and Powerspan.
It looks like Kiggen will have a wide mandate. Some of the investment themes include wind power, solar, ethanol, renewables and so on.
In fact, Blackstone has already made some cleantech investments. One example is an investment with Windland Energieerzeugungs GmbH to complete Meerwind, a massive wind farm project in the North Sea. There was also an $870 million deal for a Bujagali hydroelectric power station (late last year).
According to the Blackstone Group LP (NYSE: BX) conference call, it appears that the buyout market is getting somewhat better. For example, in Q2 the firm struck deals like the purchase of the The Weather Channel.
Despite all this, things are still far from good. In fact, Blackstone predicts that the slowdown will continue into 2009 and perhaps 2010. Actually, it looks like the problems are slipping over into Europe and even Asia.
So it should be no surprise that Blackstone's recent financial results are fairly lackluster. The firm posted a net loss of $156.5 million, or $0.60 per share, which compares to a profit of $774.4 million or $0.20 per share in the same period a year ago. Revenues plunged 63% to $353.7 million. Of course, the main reason is that Blackstone hasn't had opportunities to exit investments from its portfolio.
However, Blackstone believes there are juicy investment opportunities. For example, the firm's credit-focused hedge fund, GSO Capital, is investing in distressed debt and even providing financing for Blackstone buyouts. Interestingly enough, the alternative asset management segment saw a 34% spike in revenues to $225.2 for Q2.
Some other good news: Blackstone is still collecting large amounts of assets. So far, the amount is about $113 billion, providing the firm with lots of power to capitalize on things.
With its plans to become a public company in Q4, the folks at KKR have a lot on their plate. However, the company realizes it needs to keep bolstering the firm.
In light of the credit crunch and slowing economy, this is a tough thing. After all, much of KKR's business comes from its buyout business, which has been mostly frozen for the past year.
But, KKR understands that private equity is a long-term proposition, and there are certainly some great investment opportunities. One attractive area is infrastructure. In fact, in May KKR announced plans to raise a $10 billion infrastructure fund and retained a top Lazard (NYSE: LAZ) executive, George Bilicic, to manage things.
Well, this week there was more activity on this initiative. KKR retained John Bryson as a Senior Advisor. No doubt, he's a maestro about infrastructure. He was formerly the CEO of Edison International (he joined the firm in 1984) where he had to deal with complex regulations as well as find ways to grow operations. Before this, he was a partner at the law firm, Morrison & Foerster and even served as the president of the California Public Utilities Commission.
Of course, KKR is facing lots of competition in the infrastructure category, such as from other tier-1 private equity operators and even sovereign wealth funds. Take a look at TPG, which has recently made a preliminary $6.5 billion bid for Australia's Asciano (a port and rails firm).
Yet, infrastructure is a massive space with room for many players. More importantly, private equity firms are bulging with cash and need to find places to put it.
When the Blackstone Group LP (NYSE: BX) went public a year ago, the Chinese government invested $3 billion in the firm. No doubt, this was a sign that Blackstone was ready for lots of dealmaking.
But so far, things have been underwhelming. One of the deals was for a mere $600 million for a 20% stake in China National Bluestar Corporation (a chemicals company). There was also the $160.7 million purchase of a commercial building in Shanghai.
However, Blackstone isn't giving up. In fact, today the company announced the opening of its Chinese office in Beijing. The chief of the operation will be Fu Shan who was formerly the VP of Beijing Mainstreets Investment Group Corporation (which focuses on real estate deals). He also has extensive background with governmental divisions, such as the National Development and Reform Commission (NDRC).
Blackstone realizes that China requires more than just money and deal structuring. There needs to be staff that has deep experience in dealing with the intricacies of the country. Even with this, the dealmaking is still likely to be a slog.
Infrastructure assets can be stable, long-term investments, and as a result, private equity firms are certainly interested.
In fact, TPG has joined Global Infrastructure Partners – a joint venture of Credit Suisse and GE Infrastructure (NYSE: GE) – to make a preliminary $6.5 billion bid (when you include the debt load) for Asciano, a port and rails infrastructure firm based in Australia.
Actually, TPG has had a mixed performance with Australian deals. For example, the firm was unable to pull off its $11.1 billion buyout of Qantas.
Yet, now the markets are much different, and infrastructure operations definitely need cash – which is tough to get in the current credit crunch.
Asciano has about 8,000 employees and generates $2.5 billion in revenues. Some of its key assets include bulk export facilities, four leading container terminals, Stevedoring equipment and rail operations for freight and commodities. There are also joint ventures, such as Patrick Autocare (processing, storage and distribution of motor vehicles).
Of course, Ascaino has already rejected the buyout offer, but it's going to be tough to get a much higher bid, especially in light of the company's heavy debt load and weak operational performance over the past year.
Like other tier-1 private equity firms, the Carlyle Group has been expanding into a variety of investment categories. After all, with the evaporation of the buyout business, it's really a necessity.
However, it's far from an easy process. For example, in March the Carlyle Group suffered tremendous losses -- $16.6 billion of debt went into default -- from its publicly traded mortgage vehicle (Carlyle Capital Corp.). In fact, the company had to be shutdown.
Well, unfortunately, this hasn't been an end to the bad news. This week Carlyle had to unwind another fund: Blue Wave, which is a $600 million hedge fund (focused on mortgage-backed securities). Last year, the fund posted a horrible 17% negative return. The poor numbers were the result of bad timing and leverage.
True, Blue Wave was able to stabilize things, with a 2% return for this year. But, for Carlyle to generate substantive fees, the returns would need to be much larger – and that would likely require taking on lots of risk.
So, in the end, it looks like Carlyle made the right decision on Blue Wave.
With bulging coffers, U.S. private equity firms have been aggressively expanding into foreign markets. One of the big players is The Blackstone Group LP (NYSE: BX).
According to a piece in the Financial Times, it looks like Blackstone is taking a look at Informa Plc, a UK publisher.
Actually, it looks like other major private equity firms, such as Providence Equity Partners Ltd. and Carlyle Group, are swarming over the company.
Informa was formed, in 1998, as the result of a merger of the IBC Group plc and LLP Group plc, but if you take a look at the various businesses, the roots go back to 1734 with the first maritime publication.
As of now, Informa has operations in 40 countries and about 10,000 employees. Moreover, the firm organizes more than 10,000 events and conferences a year. There are also 2,500 subscription based information services. In other words, Informa has a fairly steady business, with strong recurring revenues.
Interestingly enough, last month Providence Equity made a preliminary overture for Informa for about $4.29 billion. But getting debt financing won't be easy.
Then again, in the case of Blackstone, it might not have to worry about such things since it looks like the firm is teaming up with the cash-flush Dubai World Trade Center sovereign wealth fund.
TheStreet.com's Jim Cramer says 30%-40% discounts have a way of bringing out the buyers.
Home prices in Stockton, CA are down 40%. In Daytona, FL, houses are priced at 30% discounts with amenities. The Inland Empire of California -- you name your price. That's how the madness ends: with huge price cuts, the way it ended in Bradenton, FL.
And believe me, we get more Fannie Mae (NYSE: FNM) (Cramer's Take) money -- forget these darned covered bonds, let's just solve the problem. You get buyers after a year and a half that buyers went on strike.
Remember, while we can't live in stocks, we know they trade like houses, and when the first stocks to go down bottom, the others are not far behind.
With the new housing bill, the rate of foreclosures will go down and the bargains will be quite evident for those who want to take them. Either a new administration will remove the fear of the illegal immigrants from buying homes -- they were a huge part of the hard hit Arizona, Florida and California markets. Or the dramatic decline in inventory at the homebuilding level has given us breathing room.
Lately, there's been lots of dire talk about the private equity world. Returns are likely to be much lower and perhaps there will be many firms that shut down.
Indeed, such things may turn out to be true.
However, whenever there is extreme turbulence and a pervasive credit crunch, there are also big opportunities to make money. Just look at Apollo Management and Cerberus Capital. Both firms made a killing during the rough early 1990s.
Fast forward to today, and we may be seeing something similar with one of the top beneficiaries possibly being Lone Star Funds. Yes, this week the fund purchased a collateralized debt portfolio from Merrill Lynch & Co. (NYSE: MER) at 22 cents on the dollar [subscription required]. The face value on it? About $30.6 billion.
This is not a one-off deal as it looks like Lone Star is hungry for high-risk debt. For example, the firm recently purchased the mortgage division of CIT Group Inc. (NYSE: CIT) and acquired Bear Stearn's mortgage segment. There was also the purchase of Accredited Home Lenders Holding Co. for $295 million.
TheStreet.com's Jim Cramer says KKR will join the list of buyout firms that fleece the small investor by going public.
Just what we need, a private-equity firm to go public. That worked just great with Fortress Investment (NYSE: FIG) (Cramer's Take), and it was terrific with Blackstone (NYSE: BX) (Cramer's Take). At least this one is some sort of reverse merger that might not inflict too much pain on the public.
Of course, folks in this business are displaying their usual lack of shame. It would be an excellent time for them to have a good reason beyond employee retention; I mean if you are making all of that money, what's the issue with retention? It would also be terrific if they were doing well, but there hasn't been a deal in so long that it would be a bit of an oddity if they were doing anything other than making a lot of fees.
But Kohlberg Kravis Roberts is a storied lot, so I figure the public will lap it up and all will be well until the losses start.
Or maybe this will be the one that's in the blue moon and the public will not be pants'd by the really smart bankers.
When UK mortgage lender HBOS Plc went to market to raise capital, the outcome was a bust. The company sold only about 8% of the securities. In the end, HBOS's underwriters -- Morgan Stanley (NYSE: MS) and Dresdner Kleinwort Ltd. -- were stuck with $7.6 billion in unwanted paper.
In light of this, it's going to be tough for UK financial institutions to bolster their balance sheets. But there is an alternative: private equity.
In fact, it looks like The Blackstone Group LP (NYSE: BX) is taking a look at Paragon, a UK mortgage lender. It appears that Paragon is opening up its books to engage in some initial due diligence.
Of course, this is still nascent, and deals can easily fall apart, especially in tough markets. However, investors are certainly excited. In London trading, Paragon's shares spiked 23%.
Even so, the value of Paragon is still down 87% over the past year, so it should be no surprise that the private equity folks sense opportunity.
The roots of Reed Elsevier go back to the late 1800s. And since then, it has become a publishing empire. And a big part of the growth has come from M&A.
Well, now the company is engaged in another key deal. That is, Reed Elsevier is engaged in an auction to sell its Reed Business Information (RBI) division.
It's an attractive asset. For example, RBI has such publications like Variety and New Scientist. In all, there are about 80 publications and annual revenues come to about $2 billion.
Now, RBI's goal is to get $2 billion to $2.5 billion. However, in light of the tough economic situation, this could be optimistic. Keep in mind that RBI may provide some financing help to potential buyers.
Then again, there may be a way to get a stronger valuation: it looks like The McGraw Hill Companies (NYSE: MHP) is interested. All in all, RBI would be a nice fit for the firm, with some revenue and cost synergies.
Rexnord Holdings has been busy with dealmaking over the past few years. For the most part, the company is an amalgam of $1.3 billion in M&A deals.
In 2006, Apollo Management bought Rexnord from The Carlyle Group. Seven months later, Rexnord merged with Zurn. And things aren't over. Now, Rexnord has filed to go public.
Basically, there are two key pieces to the company. First, there is the power transformation division, which manufactures gears, bearings, seals and conveying equipment. Next, Rexnord has a water management division. This involves the handling of professional grade plumbing and water control products.
About 85% of the total sales of Rexnord come from products where it has the leading market share positions.
A key to Rexnord is its strong distribution network. For example, the power transmission business has more than 400 distributor customers and 2,200 branches. As for the water management part, there are 550 independent sales reps.
For the year ended March 31, 2008, Rexnord posted net sales of $1.9 billion and adjusted EBITDA of $382.7 million. Since 2004, the growth rate for sales has been about 27% (when you include acquisitions).
The proposed symbol for Rexnord's IPO is "RXN." What's more, you can locate the prospectus at the SEC website.
Private equity powerhouse, The Carlyle Group, has more than 500 investment professionals across 21 countries. Of course, some of them are corporate luminaries like Louis Gerstner.
GSTrue, which is operated by 
With surging energy prices, investors have been pouring huge sums into alternative energy and cleantech deals. For example, according to a recent 
With its plans to become a public company in Q4, the folks at 
Infrastructure assets can be stable, long-term investments, and as a result, private equity firms are certainly interested.
With bulging coffers, U.S. private equity firms have been aggressively expanding into foreign markets. One of the big players is 
Lately, there's been lots of dire talk about the private equity world. Returns are likely to be much lower and perhaps there will be many firms that shut down.
When UK mortgage lender HBOS Plc 
The roots of 
Rexnord Holdings has been busy with dealmaking over the past few years. For the most part, the company is an amalgam of $1.3 billion in M&A deals. 
Closing Bell: Dow ends higher; HPQ, NOVL, PAY climb, EBAY, NVTL decline
Most likely, you'll determine the fuel for the car of the future
Chasing Value: Considering Berkshire Hathaway... again
