Why is this interesting?

Suppose you wanted a list of portfolio companies that are owned by a private equity firm, located in your state, that have been held by the private equity firm for more than 4 years… or for more than 2 years but less than 5 years. You can now perform those searches.

The “Download Results” feature is only available to our Platinum subscribers.

The new public company data module allows subscribers to keyword search the business profiles of the largest 4,000 publicly traded companies on the NYSE, NASDAQ and AMEX exchanges.

The key benefit of the keyword search is the ability to quickly find those firms that present a match for a very targeted search term. Why search by SIC, NAICS or other industry codes when you can search on exactly the terms that interest you?

Access to the Public Company data module is only available to Platinum level subscribers.

Exclusive Platinum Subscription Features:

• Download Search Results (NEW!)
• Filter Private Equity Portfolio Companies by Investment Date (NEW!)
• View Private Equity Portfolio Transaction Comments (NEW!)
• View Each Private Equity Firm’s Portfolio Holdings (NEW!)
• Search Public Companies (NEW!)
• Search Senior Lenders
• Access to the Bronze, Silver and Gold Level Data Modules, including:

- Private Equity Firms
- Hedge Funds
- Mezzanine Investors
- Small Business Investment Companies
- Valuation Firms
- M&A Advisory Firms
- Institutional Real Estate Investors

A subscription to www.PrivateEquityInfo.com provides access to the entire data suite which consists of eight data modules:

• Private equity
• Hedge funds
• Mezzanine
• Small business investment companies
• Valuation
• M&A advisory
• Senior lenders
• Institutional real estate investors

H.R. 3818 passed by a vote of 67-1 and was introduced by Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.

H.R. 3818 would amend the Investment Advisers Act of 1940 and place new registration and reporting requirements on hedge funds, private equity firms, single-family offices, and other private pools of capital. The bill, however, does exempt funds of less than $150 million (previously $30 million).

Although this new piece of legislation garnered early bipartisan support, it is is still pending a House floor vote.

The Committee is expected to vote on additional pieces of legislation such as H.R. 3817, the Investor Protection Act and H.R. 3890, the Accountability and Transparency in Rating Agencies Act later today.

Prior to the 2007-2008 sub prime mortgage crisis, bulge-bracket firms dominated Wall Street. However, many of the largest investment banks were highly leveraged, having borrowed sums of money that were too large relative to their cash or equity capital. This borrowing essentially leverages (amplifies) a firm’s  returns (up or down), making the firms particularly vulnerable to market movements. The sub prime crisis, therefore had far reaching effects and served as a cleansing of sorts for the financial markets. As the value of mortgage-backed securities in the investment banks’ leveraged portfolios declined, so did the banks’ solvency, which begs the questions: “What happened to the Bulge Bracket firms and where are they now?”

During the sub prime mortgage crisis, major financial institutions failed, merged or were bailed out by governments. Here’s what happened to the five largest U.S. investment banks (not in order of size):

• Lehman Brothers: went bankrupt
• Bear Stearns: taken over by JPMorgan Chase
• Merrill Lynch: taken over by Bank of America
• Goldman Sachs: bailed-out by the U.S. government
• Morgan Stanley: bailed-out by the U.S. government

Visit www.privateequityinfo.com/advisory-firms.php to learn more about our database of bulge bracket investment banks, middle market investment banks and business brokers. The directory is comprehensive, up-to-date and includes fully-searchable key executive biographies for each firm.

• Fund raising from limited partners
• Portfolio acquisition search
• Investment
• Growth
• Divestment
• Dispersal of funds back to limited partners

Fund Raising

Most private equity firms raise capital for a fund through investments made by limited partners - typically pensions, endowments, institutional funds, and high net worth individuals - with the private equity firm serving as the general partner.

Prior to a capital raise, private equity firms normally establish a target fund size. Depending on the firm’s track record and the general economic climate, fund raising efforts may either be under- or over-subscribed. New funds for historically successful private equity firms are commonly over-subscribed and may therefore close with capital in excess of the target fund size.

Acquisition Search

Once fund raising is complete, private equity firms begin scouting for potential portfolio investments. While private equity firms enjoy meeting directly with companies interested in selling, often the introduction between a company and a private equity firm is made through an investment banker. www.PrivateEquityInfo.com provides corporate executives, business owners and investment bankers with the ideal information resource to quickly identify those private equity firms that might have an interest in their (or their clients’) company.

Investment in Portfolio Companies
As private equity firms identify potential portfolio companies in which to invest, they go through a merger & acquisition transaction process to acquire these new portfolio companies.

Corporate Growth

Private equity firms will often have a fairly aggressive growth strategy - for both organic and growth by add-on acquisitions - as a means to create value and therefore enhance the valuation of their portfolio.

Divestment - Liquidity Event

Because limited partners do not have an infinite investment horizon, private equity firms must eventually convert equity value back to cash by liquidating portfolio holdings. A divestment could occur in the form of a buyout, initial public offering (IPO), strategic acquisition, or another private equity firm buying the portfolio investment. Regardless of how it transpires, the divestment of a portfolio company creates a liquidity event for the private equity firm, essentially converting equity into cash or more cash-like equivalents.

Capital Gains

Private equity firms make money both from the cash flow that a portfolio company produces while it is owned by the private equity firm as well as from the capital gains realized upon exit. The liquidity event at exit produces and finalizes a capital gain (or loss) for the partnership for that particular investment.

Dispersal of Funds

The dispersal of the capital gain (or loss) from the fund to the limited partners provides the limited partners with a definitive return on investment for the life of the fund.

Next Fund

Long before a private equity firm finalizes its dealings with a particular fund, the PE firm begins the process of raising money for the next fund. In fact, it’s not uncommon for a successor fund within a private equity firm to purchase some lingering portfolio holdings from a prior fund.

Private Equity Info provides a comprehensive database of private equity firms, their investment interests, acquisition criteria, transaction types, portfolio companies and professional biographies. Plus, view other related firms such as hedge funds, mezzanine investors, small business investment companies, valuation service providers, investment banks, institutional real estate investors and senior lenders.

Mezzanine debt can be used for a variety of purposes, but is generally used in corporate finance deals for growth capital and acquisitions.

Private Equity Info allows you to search the universe of U.S. mezzanine firms by state or alphabetically and view their contact information. You will also be able to keyword search the professional biographies of mezzanine investor executives to quickly determine the right person to approach at a particular firm.

In addition to searching institutional real estate investors by location or investment focus, subscribers may now quickly identify those firms that present a strategic fit based on the general comments www.PrivateEquityInfo.com tracks for each firm.

This data set includes the name, title, email address and professional bio of more than 800 mezzanine investor executives. We also implemented a new search engine on this data module to allow subscribers to keyword search these professional bios.

Typically, private equity firms are ranked based strictly on their fund size. However, due to the current economic climate, fund size may not be the most accurate measure of a firm’s current activity and investment capacity.

PrivateEquityInfo.com has ranked the largest, global private equity firms based on a more holistic view, considering a variety of metrics. The parameters include: fund size (of course), current investment appetite, maximum deal size the firm will consider and deployment of capital. This ranking is therefore admittedly subjective.

Individual firm profiles of these private equity firms and others are available at PrivateEquityInfo.com

TOP 30PRIVATE EQUITY FIRMS
1. Bain Capital
2. Texas Pacific Group
3. Apax Partners
4. Blackstone Group
5. Carlyle US Venture
6. Silver Lake Partners
7. Fortress Investment Group
8. Apollo Investment Corp.
9. Advent International
10. Kohlberg Kravis Roberts & Co.
11. BC Partners
12. CVC Capital Partners
13. Candover Investments
14. Terra Firma Capital Partners
15. First Reserve Corp.
16. Providence Equity Partners
17. EQT Partners
18. American Capital
19. Welsh, Carson, Anderson & Stowe
20. Permira
21. CCMP Capital
22. Goldman Sachs Capital Partners
23. Cinven
24. 3i US
25. Warburg, Pincus & Co.
26. Hellman & Friedman
27. General Atlantic
28. GTCR Golder Rauner
29. Charterhouse Development Capital
30. PAI Partners

• accounts receivable financing
• commercial real estate loans
• equipment financing
• growth financing
• M&A financing
• project financing
• Small Business Administration (SBA) financing
• working capital financing

Even though senior debt has first priority in the event of a liquidation and is therefore a lower risk investment for the lender (compared to junior, subordinated debt, mezzanine debt or equity investments), currently, favorable access to the debt capital markets is limited as banks have severely tightened lending requirements in the current economic climate.

To quickly locate senior lenders appropriate for your company, Private Equity Info provides a comprehensive database of more than 4,600 senior lenders searchable by loan types & purposes, location of headquarters and number of offices.

The measure is part of Obama’s recovery plan, which attempts to regulate and restore public confidence in the investment markets. In an effort to implement the recovery plan and avoid threats to America’s financial apparatus, Private Equity firms, Hedge Funds firms, Venture Capital firms, and all other private capital firms will now have to register with the SEC as a Registered Investment Advisor (RIA) and provide periodic information regarding their assets under management.

Registered Investment Advisors (RIA) will submit Form ADV to the SEC, which will specify the type of assets under management, the investment style, and the key officers of the RIA.

FIND PRIVATE EQUITY FIRMS AND HEDGE FUNDS
Private Equity Info provides a comprehensive database of private equity firms, their investment interests, acquisition criteria, transaction types, portfolio companies and professional biographies. Plus view other related firms such as hedge funds, mezzanine investors, small business investment companies, valuation service providers, investment banks, institutional real estate investors and senior lenders.

• Retainer fee
• Success fee
• Expense reimbursement fee

The inclusion or exclusion of these three components will vary, depending on the investment bank, the deal size and the particular client. For example, bulge bracket investment banks negotiating deals valued in excess of $100 million (enterprise value) will likely have a fee structure that involves all three components. Middle market investment banks’ fee structure may include all three components, but often the expense reimbursement fee is the first to be negotiated out of the contract. And for smaller middle market deals, it’s not uncommon for the up-front fee to be creditable to the success fee or waived altogether. Business brokers negotiating somewhat smaller deals will usually only include a success fee. In all cases, the bulk of an M&A advisor’s compensation is in the success fee.

Success Fee
The primary fee, the success fee, is typically a percentage of the enterprise value (EV) of the company for sale and contingent on a successful transaction. Thus, if the deal doesn’t close, the advisor does not get paid a success fee.

The success fee may further be determined according to the traditional Lehman scale (i.e. single, double and triple) and other similar formulas where an initial percentage of the enterprise value is charged for a minimum sales price and a lower, descending percentage is charged on amounts exceeding that minimum.  This structure can also be adapted to escalating percentages, which can provide stronger incentives for the M&A advisor to negotiate the best closing terms possible.

Retainer Fee
The amount of the retainer fee charged is also dependent on the size and complexity of the deal. The initial retainer fee can be a percentage of the enterprise value but is usually presented as a flat, up-front fee. Some firms schedule a series of retainer fee payments associated with pre-defined deal milestones. The retainer fee is normally very negotiable.

Expense Reimbursement Fee
The expense reimbursement fee would include any out-of-pocket expenses for travel and other ancillary costs incurred by the M&A advisor working to close the transaction. The larger the transaction size, the more likely expenses will accumulate.

Find an M&A Advisor
Visit www.PrivateEquityInfo.com to search and sort 1,100+ U.S. M&A Advisory Firms by location, typical transaction size or alphabetically. View the firms’ contact information, key executives (view names, titles, email addresses and biographies) and categorization (as bulge bracket investment bank, middle market investment bank or business broker).

Private equity firms and hedge funds are similar in that both invest from a leveraged pool of capital normally contributed by limited partners; both compensate the management team based on a percentage of profits (typically 20%) as well as charge a fee on assets under management (typically 2%); and both are lightly regulated (as of this writing).

While some firms do blur the distinction between typical private equity and hedge fund activities by operating with one foot in each camp, the most significant difference between the two types of firms is in is their underlying business model and how they approach their investments.

Private equity firms tend to invest in private companies that are longer-term, ill-liquid assets with the intent to buy, grow and exit these portfolio companies over a three to seven year period. Over the course of an investment, a private equity firm will address capital structure, management team, strategic growth and fundamental business model issues core to the investment.

In contrast, hedge funds primarily focus on investing in more tradable (and therefore usually more liquid) securities such as equities, bonds, derivatives, futures, commodities, foreign exchange, swaps, etc. As such, hedge funds are likely to hold investments for a much shorter duration, sometimes for merely minutes or seconds with no intent to fundamentally alter the course of direction of a direct investment in a company.

Capital Structure Balance

The combination of debt and equity to finance assets varies from one industry to another and from company to company. However, in general, companies attempt to balance the trade-off between maximizing returns and minimizing business risk. Because equity is “more expensive” than debt (that is, it requires a higher expected return), a company may reduce its weighted average cost of capital (WACC) by altering the capital structure to favor a higher percentage of debt (thereby increasing financial leverage to boost returns). However, this must be balanced against cash flow requirements and other liquidity constraints.

See future blog posts for discussions about how capital structure affects a company’s cost of capital and about agency issues that may pit debt, equity and management stakeholders against each other.

Find both debt and equity providers at www.PrivateEquityInfo.com. Private Equity Info is a regularly-updated, powerful database of private equity firms, hedge funds, mezzanine investors, small business investment companies, valuation firms, M&A advisory firms, institutional real estate investors and senior lenders.

Private equity firms are typically structured as investment partnerships where the general partners manage the firm’s fund on behalf of the limited partners (the investors). The private equity firm then uses the fund to purchase an equity position in a number of companies. When these equity investments are sold, the investors typically receive 80% of the profits and the managers collect the remaining 20% (known as the carried interest).

Current Treatment - Carried interest profit is eligible for capital gains taper relief, which is why it is currently taxed as a capital gain at 15% for both investors and managers. Investment partnerships have long maintained this lower rate.

Debate and Uncertain Future Outcome - In recent years, lawmakers have been pushing to tax carried interest as ordinary income, which would set a much higher rate than 15%. Supporters of higher taxing of carried interest, such as the Coalition for Tax Justice, have argued the issue is tax fairness. A bill proposing a change would require fund managers to treat carried interest as ordinary income received in exchange for the performance of services to the extent that carried interest does not reflect a reasonable return on invested capital. The bill would continue to tax carried interest at capital gain tax rates to the extent that carried interest reflects a reasonable return on invested capital. President Obama’s 2010 released budget proposes to raise taxes on carried interest to more than 39%, effective 2011.

While both venture capital and private equity firms provide cash in exchange for equity positions in companies, the main distinction is the juncture in which the investment is made. With the exception of turnaround investments, private equity firms tend to invest in more established businesses with a history of positive, and preferably reliable, cash flow whereas venture capital firms tend to invest in earlier-staged companies with a less proven market presence.

The distinction between the terms venture capital and private equity described above applies to the vernacular used in the United States. That is, in the United States, the two terms are used as if they are distinctly different types of firms investing in different stages of corporate growth. In Europe, however, the terms venture capital and private equity may be used somewhat interchangeably in that British English uses the term venture capital to describe a specific subset of the private equity market. Therefore, in Europe, when someone speaks about private equity, they may in fact be referring to what someone in the United States would call a venture capital firm.

Using the distinction drawn in the United States, the private equity data module available on www.PrivateEquityInfo.com specifically excludes venture capital firms unless a firm blurs the distinction by operating across the spectrum.