Private Equity in the Modern World - Essay Example

? Private Equity Introduction Brigham and Ehrhardt (2005, p. 664) indicates that “in a going private transaction the entire equity of a publicly held firm is purchased by a small group of investors that usually includes the firms current senior management.” There are usually two ways in which this transaction is carried out. In one instance the managers acquire all the equity of the company and in the other it does so with a small group of investors who set the previous managers to manage. These are referred to as management buy-out (MBO) and management buy-in (MBI) respectively. This process normally involves substantial borrowings and is therefore described as Leveraged buyouts (LBO). Another term which is normally used is “taken private” which relates to a buyout of a public company and in the process removing it from the stock exchange listing, and therefore transforming it into a private firm (Fraser-Sampson, 2007). Public companies are normally taken private because they have the potential of providing substantial cash flows to investors as the shares are currently undervalued on the stock market. The managers see the potential of “significantly boosting the firm’s value under private ownership” (Brigham and Ehrhardt 2005, p. 664). This means that companies taken private have the potential of enriching not only the managers who take part in the buyout but the public shareholders who are often offered prices higher than the going market price to sell their shares. Sometimes these shareholders resist but in the end they have to sell their shares because the buyers have enough of the company’s shares to sufficiently influence the takeover of the public company. A large number of public companies have been taken private over the years. A list of some of these companies is provided in Appendix 1 and 2. This list is by no means exhaustive but gives an indication as to the level of activities taking place as it relates to these types of transactions. Arguments for and against public to private transactions A number of arguments have been levelled against public to private transactions. However, there have also been several arguments in its favour. According to Becky (2002, Private vs. Public …) “… in the 1980s a lot of public companies were taken private through a process called a leveraged buyout. That trend may have benefited the entire economy by making the companies a good deal more efficient.” Arguments against public to private transactions Opponents to public companies being taken over by private equity have levelled a number of criticisms against these types of transactions. They believe that some of these private equity managers actually buy public companies, reduce employees, strip the companies of assets and then sell them in secondary buy-out deals. Some also indicate that they are allowed to set off interest payments against income and in the process paying less tax. According to Wiley (2007, p.79) “some countries are pursuing tougher and tighter ‘thin equity’ tax rules under which it can be difficult to make loan interest fully deductible.” Adding value by increasing earnings multiple Some of the opponents of these types of transactions have indicated that there are many ways the managers of public companies could add value to the company instead of allowing them to go private. These include taking out loans instead of issuing more shares which would be favourable to shareholders as they would see their earnings per share increase. These companies would also pay less tax because the interest on these loans is tax deductible. Increasing the cash flow of the Company Cash flow can be improved through proper management of public companies. There is normally unpredictability in the levels of cash flow in public companies that have been taken private and which therefore need to make regular interest payments. Debt added to private company These purchases normally take place with the use of large amounts of debt, referred to as leveraged buy-out (LBO). High levels of debts in the private equity system could pose potential dangers for these companies (Acharya et al, 2008). Because of the high levels of debt and the consequent regular payment of interest some companies go bust soon after because the anticipated cash flows do not take place to make the relevant interest payments. Public Companies have superior access to capital and liquidity Public companies are not usually highly leveraged and so they have the capacity to borrow and remain viable. This is as opposed to a LBO which does not have the immediate capacity to take any more loans after the buyout. The stock market provides public companies with better access to funds. They can issue new shares to current shareholders by way of a rights issue and they could also convert debt into equity if that option was laid down in debt covenants. Balancing of stakeholders interests Private equity firms are concerned with a limited number of stakeholders. They are not expected to have their annual report ready within any specified time period as is the case with a public company. Issues of governance such as audit compliance, risk management and remuneration are serious issues in public companies (Acharya et al 2008, The voice of experience …). Management therefore has to balance the varying interest of their stakeholders- the community in which they operate, the shareholders, employees, advisors acting on behalf of potential investors, the government and their customers. Arguments in favour of public to private transactions According to Brigham and Ehrhardt (2005, p. 664-665) “the primary advantages to going private are administrative cost savings, increased managerial incentives, increased managerial flexibility, increased shareholder participation, and increased use of financial leverage, which of course reduces taxes.” Other arguments in favour of public to private equity includes the ability of private equity firms to add value to the business, thus increasing earnings multiple. Additional arguments include the avoidance of regulatory requirements, long term strategic planning, the alignment of the interest of management and owners, stakeholder management and superior performance management. Administrative cost savings The requirements for public companies are stringent and involve the preparation of quarterly as well as annual reports in addition to securities registration. This along with the investor meetings that are normally held in publicly listed companies to brief shareholders and investors and to vote on resolutions are normally time consuming. In addition to eliminating certain non-value added costs going private releases management from administrative matters that do not add value to the company. Consequently, they therefore have the opportunity of spending time on value added activities which benefits the company and are generally in the best interest of stakeholders. Increased managerial incentives There are increased benefits to be gained from high levels of managerial performance. According to Brigham and Ehrhardt (2005, p.665) “Their increased ownership means that the firm’s managers benefit more directly from their own efforts, hence managerial efficiency tends to increase after going private.” There is an incentive for them to work hard to ensure that the firm does well as they could see themselves benefiting tremendously from increases in the net worth of the company. The possibilities of huge returns are tremendous but if the firm does not do well they stand to lose their investments. The fact that they have a stake in the firm therefore provides them with the impetus to carry out their functions well. Increased Managerial Flexibility The short term focus on returns to shareholders’ equity in public companies no longer exists. They are more focused on the long term and building a firm foundation. They now have the opportunity to take the necessary risks which has possibilities for huge returns. They are no longer constrained with satisfying a broad group of stakeholders and so they do not have to worry about a fall in the share price as it is with a publicly traded company. The pressures that they normally come under, no longer exists like ‘heavy weights’ on their shoulders. It’s like ‘freedom at last’ and so if they want to sell an asset it does not have to be approved or “justified by a large number of shareholders with potentially diverse interest” (Brigham and Ehrhardt 2005, p. 665). Increased shareholder participation According to Brigham and Ehrhardt (2005, p. 665) “going private typically results in replacing a dispersed, largely passive group of pubic shareholders with a small group of investors who take a much more active role in managing the firm.” These new investors have a key position in the business and are therefore in a position to monitor the management of the firm and ensure that they are adequately monitored and provided with the necessary incentives which will encourage and motivate them to aim for high levels of performance than they would normally have in a publicly listed company. Increased financial leverage This has the advantage of reducing the amount of tax the firm pays and forces managers to hold costs down in order to ensure that interest payments are made. Brigham and Ehrhardt (2005, p. 665). Going private add value to public companies Value creation is the main factor or argument of the proponents of public companies taken private. Private equity firms add value to pubic companies in ways that publicly managed companies cannot imagine. Normally after an average of three years the earnings multiple of the business is increased significantly. In addition to the undervalued stocks of publicly listed companies, private equity firm managers usually identify labour productivity as a key aspect of the ingredient to increasing returns and added value. They create value by eliminating none value added activities over a period of time through value engineering. In this process of creating value excess labour is generally the first ‘excess fat’ that is trimmed. By doing so the productivity of labour is increased. According to Wiley (2007, p. 87) “the ability to grow the earnings of a company is the most prized of buyout firm abilities”. Private equity firms are not as risk averse as public company managers who are constrained by the wishes of their shareholders and so do not have a free hand in making the choices that they may want to make which can determine their fate in the company. Bernstein (qtd. in Shaw, 2003) states that: “Risk is a choice rather than a fate. The actions we dare to take, which depend on how free we are to make choices, are what the story of risk is all about. And that story helps define what it means to be a human being.” Avoidance of regulatory requirements Public companies call for strict regulatory requirements. These requirements mean that public companies sometimes have to shift resources from value added activities to get their financial statements out on time. Non-presentation of financial statements can result in fines and delisting from the stock exchange. This is not so in private equity firms and so managers are free to spend time on value added activities and ensuring that the long term objectives of firms are achieved. Long term strategic planning Private equity firms are focused on the long term for a number of reasons. Managers will not be able to earn bonuses for themselves if the company does not do well. After the takeover of a public company some time would pass before private equity managers start to see some returns on their investments. Because the company is normally highly leveraged, the focus has to be on ensuring that the cash flow is there to make loan repayments and to provide the managers who are the owners with a fair return. The focus is on growth and value creation over the long term. Aligning the interest of ownership and management In private companies the owner and manager is the same and therefore the interests of both groups are aligned. This is different from public companies where the managers are not the owners. Some may own a few shares but not enough to have any major influence on decisions. Managers in private companies are generally focused on ensuring that the company does well. Unnecessary or unproductive employees are terminated and employees are monitored to ensure that they carry their end of the bargain. Stakeholder management Management of stakeholders and their needs is very important to the success of any company. While public companies have a wider range of stakeholders, the private equity firms have only the fund investors who are in it for the long haul. According to Acharya et al (2008, The voice of experience …) the effective stakeholders in the private equity funds are essentially locked in for the duration of the fund. The private equity fund managers who invest on their behalf are in effect a single bloc and so act in alignment. Further, these representatives are more engaged than the board members of public companies. They are much better informed about the realities of the business than investors in public companies. Additionally, the burden of the task of managing investors is not as onerous as in public companies and the quality of dialogue between the stakeholders is much better (Acharya et al, 2008). Performance management The management of private equity firms focus on key performance indicators to determine whether their goals are achieved. The key performance indicators are closely monitored to determine when corrective actions are necessary. Managers are focused on value creation and so paying keen attention to performance indicators such as return on equity, return on assets and other profitability metrics are very important. Managers make projections and meet when necessary to determine their current position in relation to the goal(s). Anything that is preventing the targets from being met is dealt with appropriately. Managers are not averse to taking risk as they seek to create value for investors. Employees are not left to do as they please. Whatever they do has to be related to the goals and objectives of the business. If they are not making the required contribution then they are replaced with employees who have the skills and aptitude to assist the company in attaining its goals. Supporting information based on research A number of surveys have been done to determine the merits of public to private equity transactions. In an article written by Acharya et al (2008, The voice of experience: Public versus private equity) which is based on an interview of twenty (20) directors who have worked on both private and public boards of reputable companies. They indicated that the superior performance of the private equity company stems from “financial engineering” and “stronger operational performance” of which the behaviour of the board is a key element. Fifteen (15) of the twenty (20) directors indicated that the private equity boards added more value. None of the twenty (20) directors indicated that their public counterparts were better. On a five point scale they rated private equity boards as being more effective than public boards. Private equity boards averaged 4.6 while public boards averaged 3.5 on the five point scale. The diagram below shows the details of these ratings based on interviews with 20 UK based directors who have served over five years on the boards of both private and public companies (FTSE 100 or FTSE 250 businesses and private equity owned) most with an enterprise value greater than ?500 million. These interviews were carried out by reputable individuals. Chart created from data in McKinsey’s Quarterly Report In the chart above private equity boards and therefore the companies were rated higher in terms of overall effectiveness, strategic leadership, performance management and stakeholder management than public companies. The public limited companies were however rated higher on the basis of their development/succession management and on governance issues such as risk management and audit compliance. Even though these are very important issues the private equity companies tend to place less emphasis on these areas. Shareholders of the public companies have to be provided with timely and accurate information on a regular basis and so corporate governance and risk management is more central to their business model. A lot of managements’ time is therefore taken up with this effort in publicly listed companies. The diagram below shows what the 20 respondents described above believed to be the top priorities on the boards of the publicly listed companies and private equity firms on which they served. Chart created from data in McKinsey’s Quarterly Report The chart above shows that the top priorities for private equity companies are value creation followed by exit strategy were seen as top priority by 18 and 11 respondents respectively. Strategy initiation (including M&A), External relations and 100 day plan were seen as priority by only five respondents. The chart also shows that the top priorities of the publicly listed companies are strategy initiation, organisation design and succession followed by governance (compliance and risk) along with value creation and external relations with 9, 7, 5, 5 and 4 respondents respectively seeing these as top priorities. The importance of value creation in public companies taken private Value creation is important to private equity firms because they are managing investors’ funds. Even though the investors are able to sell in a secondary market it is not a simple process as on a stock market. It therefore means investors are locked into a deal for at least a three year period. It is therefore very important that managers of private equity funds take private publicly listed companies that are normally mature and established rather than newly started enterprises. The deal normally involves bank loans and so even though cash flows are unpredictable as mentioned earlier they have to be highly probable. It therefore means that the profit level of companies taken private should be such that they provide good returns on investment. These investors focus on how possible it is to turnaround the company by eliminating non-value added activities. Technology considerations are normally irrelevant and these firms consider control of these companies to be of utmost priority. According to Fraser-Sampson (2007) these transactions generally result in reductions in employment “through restructuring and rationalisation and certainly of reducing tax yield since financial restructuring will use loan interest to reduce taxable earnings.” The future of private equity According to Wright, M., Borrows, A., Ball, R & Scholes, L. (2007, p. 1-8) in addition to the concerns of increased leverage concerns have also been raised about “the sustainability of private equity returns due to the general increase over time in entry EBIT multiples”. They further state that “a subsequent slowdown in GDP could threaten the buy-out market and make it more difficult to service large amounts of debt.” Information in The Economist (2010, Finance after the crisis …) suggests that one of the major Private equity firms Blackstone which had seven (7) of the largest buyouts in history indicates that: In 2006 it bought Freescale Semiconductor, a chipmaker, for $17.6 billion, and Equity Office Properties for $38.9 billion; it forked out $25.8 billion for Hilton Hotels in 2007. Times have changed. On August 13th Blackstone announced it would buy Dynegy, an energy firm, for nearly $5 billion, the largest buy-out of the year so far but a sum that would scarcely have turned heads in the boom. This is no indication of what the future holds. The period 2008 to 2010 was a very difficult period for businesses. It was a recessionary period in which a large number of financial institutions went under. It was therefore hard for firms like Blackstone to obtain loan financing. It therefore meant that investors whose funds they were holding were becoming unhappy because nothing was happening and therefore were not eager to place anymore funds with these equity firms. Another source of problem for Blackstone and others in the US is that politicians are considering “taxing the “carried interest” of private equity executives at a higher tax rate” The Economist (2010, Finance after the crisis …). This is not a positive sign for private equity firms. However, countries are now coming out of the recession and late 2011 to 2012 should prove to be a better period for these firms. Fraser-Sampson (2007) suggests that private equity firms have sufficient funds to engage in buyouts which require large sums. Obtaining loans is difficult right now but they will get over this crunch. Private equity has its place and will continue to do well as they have always done in good times. Like any other business bad times will impact them negatively. References Acharya, V., Kehoe, C & Reyner, M. (2008). The voice of experience: Public versus public equity. Available: https://www.mckinseyquarterly.com/The_voice_of_experience_Public_versus_private_equity_2245. Last accessed 30th Jan 2011 Becky, G. (2002). Public vs. private – staying private has advantages, say owners. The Mississippi Business Journal. Available: http://www.allbusiness.com/business-planning/business-structures-corporations/972977-1.html. Last accessed 31st Jan 2011 Brigham, E. F & Ehrhardt, M. C. (2005). Financial Management: Theory and Practice. 11th ed. USA: Thomson South-Western Fraser-Sampson, G (2007). Private Equity as an Asset Class. West Sussex: John Wiley & Sons Ltd Shaw, J. (2003). Corporate Governance and Risk: A Systematic Approach. New Jersey: John Wiley & Sons Inc. The Economist. (2010). Finance after the crisis: Survival of the richest. Available: http://www.economist.com/node/16846534?story_id=16846534. Last accessed 31st Jan 2011 Wright, M., Burrows, A., Ball, R & Scholes, L. (2007). Private Equity and Buy-outs: Jobs, Leverages, Longevity and Sell-offs. Nottingham University Business School, UK: Centre for Management Buy-out Research Appendix 1 – Going private (1990 – 2001) Date Announced Date Effective Target Name Sales Ratio of Deal Value to Sales EBITDA Ratio of Ratio of Enterprise Enterprise Value to Value to EBITDA EBIT Enterprise Value at Announce ment ($mil) Equity Value at Announceme nt ($mil) EBITDA/S ales 4/1/1990 17/07/1990 Hartwell PLC 556.9941 0.678 55.78168 6.77 8.117 377.642 377.68 10.01477 1/11/1990 31/01/1991 Benjamin Priest Group PLC 210.3352 0.546 21.22791 5.41 7.074 114.843 116.3 10.09242 26/2/1992 31/10/1992 Continuous Stationery PLC 39.42748 0.393 3.092814 5.01 5.85 15.495 11.86 7.844311 4/8/1992 31/12/1992 Trimoco PLC 424.6667 0.12 16.07571 3.17 3.971 50.96 51.18 3.785489 15/6/1993 16/07/1993 Graig Shipping PLC 51.59754 0.487 5.290105 4.75 4.967 25.128 19.14 10.25263 2/3/1994 23/03/1994 Clayton Son & Co(Holdings)PLC 42.66995 0.203 0.137733 62.89 nm 8.662 5.06 0.322786 28/4/1994 4/7/1994 Usborne PLC 1225.867 0.015 7.824681 2.35 3.108 18.388 6.85 0.638298 20/6/1994 - Towles PLC 26.49074 0.54 0.995477 14.37 nm 14.305 13.43 3.757829 12/8/1994 10/11/1994 Andrews Sykes Group PLC 86.06693 0.508 2.433055 17.97 nm 43.722 14.35 2.826934 30/8/1994 30/08/1994 Heron Distribution(Heron Intl) 43.73872 0.421 3.63913 5.06 7.542 18.414 18.41 8.320158 1/2/1995 30/06/1995 Norcity Homes PLC 0.995272 11.844 0.57756 20.41 24.426 11.788 11.79 58.03038 10/3/1995 2/6/1995 Edmond Holdings PLC 25.58889 1.17 0.673998 44.42 60.831 29.939 20.2 2.633949 28/4/1995 12/6/1995 Kelt Energy PLC 49.4225 2.916 16.32118 8.83 9.351 144.116 125.03 33.02378 16/5/1995 16/05/1995 Sweater Shop PLC 54.15617 4.495 7.557653 32.21 38.149 243.432 234.6 13.95529 14/6/1995 1/9/1995 Erith PLC 147.62 0.65 6.292 15.25 20.738 95.953 84.23 4.262295 17/6/1995 10/7/1995 Associated British Industries 82.31068 0.927 8.506355 8.97 13.229 76.302 64.08 10.33445 27/10/1995 7/11/1995 Stanley Gibbons Holdings PLC 8.823625 0.618 0.861453 6.33 8.952 5.453 6.18 9.763033 15/11/1995 5/2/1996 Frank G Gates PLC 284.5248 0.101 8.027095 3.58 25.9 28.737 12.48 2.821229 1/2/1996 30/04/1996 Trade Indemnity Group PLC 96.89241 2.714 19.99741 13.15 17.311 262.966 269.6 20.63878 19/4/1996 7/6/1996 Everest Foods PLC 62.57507 0.706 1.60098 4.53 6.545 44.178 42.34 11.10314 1/5/1996 2/10/1996 Central Motor Auctions PLC 22.3418 1.024 2.480642 14.29 43.54 22.878 18.72 8.410211 3/6/1996 23/08/1996 EPS PLC 37.50078 0.639 3.153895 9.66 12.821 23.963 21.48 4.944331 28/6/1996 16/08/1996 Inoco PLC 72.60669 1.645 3.589915 37.87 38.595 119.438 57.69 24.19059 12/7/1996 11/10/1996 Continental Foods PLC 41.84844 0.706 10.12339 8.23 11.769 29.545 24.97 93.20412 19/7/1996 14/09/1996 Rainford Group 97.95016 1.264 91.29359 12.23 13.872 123.809 123.9 4.548531 7/10/1996 17/01/1997 Calor Group PLC(SHV Holding) 429.1831 1.857 19.52153 8.73 14.553 796.993 791.05 2.376894 23/1/1997 12/3/1997 William Cook PLC 207.6145 0.677 4.934777 7.2 10.347 140.555 129.55 58.26125 11/3/1997 17/09/1997 Ipeco Holdings PLC(Castledon) 31.44064 1.196 18.31771 7.62 10.913 37.603 39.85 8.140605 6/6/1997 29/09/1997 Goldsborough Healthcare PLC 176.5939 1.113 14.37581 10.73 14.117 196.549 125.35 0.58175 10/6/1997 - SR Gent PLC 487.34 0.2 2.835102 6.78 8.748 97.468 50.14 11.01742 22/9/1997 11/11/1997 Instem PLC 32.53396 0.427 3.584403 4.9 6.652 13.892 15.78 43.99024 17/10/1997 19/12/1997 Dwyer Estates PLC 24.93497 5.198 10.96895 36.16 37.636 129.612 58.14 18.93069 7/11/1997 27/02/1998 BSM Group PLC 53.46166 1.943 10.12066 9.47 11.484 103.876 91.89 20.48927 3/12/1997 9/3/1998 Morris Ashby PLC 71.13859 1.205 14.57578 8.47 13.374 85.722 81.18 9.590543 15/12/1997 23/01/1998 Wellman PLC 202.6033 0.6 19.43076 8.34 10.289 121.562 119.33 12.02312 22/12/1997 13/01/1998 Betterware PLC 90.14582 1.927 10.83834 8.94 10.534 173.711 194.63 9.900269 6/1/1998 19/03/1998 JLI Group PLC 134.4167 0.408 13.30761 5.06 8.143 54.842 41.17 25.84766 8/1/1998 6/4/1998 Fairway Group PLC 123.6634 0.41 31.9641 3.81 9.618 50.702 45.56 11.64896 3/2/1998 30/04/1998 Henderson PLC 106.212 5.089 12.3726 16.91 19.08 540.513 628.45 14.26854 16/2/1998 1/4/1998 Healthcall Group PLC 94.97467 0.908 13.5515 6.97 9.468 86.237 82.35 2.516655 16/2/1998 9/4/1998 B Elliott PLC 267.6921 0.406 6.736886 8.02 11.883 108.683 73.62 119.6978 21/4/1998 29/05/1998 Home Counties Newspapers Hldgs 60.50849 1.473 72.42734 13.23 18.456 89.129 94.76 5.748026 18/5/1998 31/07/1998 Christie's International PLC 294.3476 3.654 16.91918 14.85 17.73 1,075.55 1,098.74 4.851317 19/5/1998 10/6/1998 Tunstall Group PLC 121.2083 0.677 5.880197 4.85 6.307 82.058 85.63 16.82289 18/6/1998 27/07/1998 Cliveden PLC 15.64539 4.574 2.632006 12.17 16.311 71.562 71.56 4419.073 26/6/1998 21/07/1998 Fired Earth PLC 18.19373 1.817 803.9941 12.56 14.667 33.058 33.93 0.284144 30/6/1998 25/11/1998 Thorn PLC 2480.295 0.765 7.047613 2.36 9.955 1,897.43 1,559.72 8.96665 30/6/1998 23/09/1998 AG Holdings PLC 68.08131 0.824 6.104613 7.96 9.82 56.099 48.09 2.715005 6/7/1998 19/11/1998 Beales Hunter PLC 180.8033 0.183 4.908818 5.42 7.625 33.087 19.16 328.0575 17/7/1998 20/08/1998 Radius PLC 38.09487 0.643 124.9731 4.99 10.7 24.495 28.24 0.958001 22/7/1998 25/09/1998 Willis Corroon Group PLC 338.309 1.304 3.241005 3.53 5.07 441.155 1,397.34 9.751265 24/7/1998 28/10/1998 Capitol Group PLC 36.20985 1.015 3.530918 11.34 12.051 36.753 38.74 14.11703 6/8/1998 18/09/1998 Concentric PLC 246.0859 0.594 16.04627 6.27 8.317 146.175 142.9 1.134594 28/8/1998 25/09/1998 Bucknall Group PLC 66.57073 0.41 9.397813 7.73 9.799 27.294 24.83 6.32634 4/9/1998 16/09/1998 UPF Group PLC 133.3423 0.71 1.512893 5.9 7.628 94.673 71.54 22.83786 14/9/1998 13/10/1998 John Haggas PLC 98.92434 0.304 6.25829 3.2 6.56 30.073 22.33 5.515192 25/9/1998 - Caledonian Trust PLC 49.79043 0.773 11.37107 25.44 26.293 38.488 5.73 34.70468 18/11/1998 13/04/1999 Clyde Blowers PLC 164.6829 0.369 9.082579 9.71 9.71 60.768 40.49 2.118667 24/11/1998 5/3/1999 Parkland Group PLC 381.8962 0.106 132.5359 3.56 nm 40.481 8.12 0.29112 2/12/1998 22/03/1999 Crest Packaging PLC 148.6852 0.27 3.150144 4.42 7.521 40.145 27.18 9.008844 2/12/1998 30/04/1999 Marley PLC 1375.184 0.532 4.003443 5.52 9.859 731.598 600.11 12.96766 18/12/1998 5/3/1999 Bearing Power International 152.2569 0.144 13.71659 6.96 11.228 21.925 10.52 0.780521 23/12/1998 6/4/1999 Eyecare Products PLC 109.3248 0.234 14.17687 6.39 16.752 25.582 22.33 21.31238 23/12/1998 12/3/1999 Banner Homes Group PLC 103.6993 0.582 0.809395 4.4 4.517 60.353 37.14 135.9718 8/1/1999 11/3/1999 Hozelock Group PLC 94.66203 1.58 20.17473 10.55 16.366 149.566 139.78 0.692994 11/1/1999 14/04/1999 Copyright Promotions Group PLC 24.54493 1.046 33.37419 31.72 43.073 25.674 33.28 0.386678 14/1/1999 22/03/1999 Sears PLC 3016.156 0.301 20.90179 45 95.732 907.863 903.25 11.5782 5/2/1999 26/04/1999 Watts Blake Bearne & Co PLC 194.1088 1.066 0.750576 6.2 9.903 206.92 170.28 29.23654 8/2/1999 8/3/1999 Rebus Group PLC 152.3907 1.912 17.6441 13.94 20.513 291.371 274.72 31.7176 26/2/1999 21/04/1999 Coutts Consulting Group PLC 52.79858 0.988 15.43648 69.5 nm 52.165 37.32 4.119601 3/3/1999 16/06/1999 Wainhomes PLC 157.1765 0.98 49.85263 8.73 9.176 154.033 142.47 7.095509 18/3/1999 5/7/1999 Goldsmiths Group PLC 158.02 0.549 6.509795 5.62 6.823 86.753 71.5 28.66625 22/3/1999 7/5/1999 Westminster Health Care 327.6958 1.535 23.25168 10.09 14.109 503.013 336.17 1.657205 23/3/1999 24/06/1999 Fitch PLC 49.05595 0.84 14.0625 6.33 8.436 41.207 41.76 4.692727 1/4/1999 11/6/1999 Hall Engineering (Holdings) 352.1264 0.451 5.835456 6.83 10.035 158.809 146.95 18.72531 6/4/1999 12/7/1999 Tie Rack PLC 72.58065 0.217 3.406011 1.12 2.012 15.75 35.94 291.7529 9/4/1999 4/5/1999 Avonside Group PLC 99.58333 0.276 18.64729 4.71 6.284 27.485 35.9 1.024695 30/4/1999 21/07/1999 Tracker Network PLC 19.63682 2.77 57.291 15.97 21.346 54.394 60.88 25.53361 30/4/1999 13/07/1999 Cala PLC 176.8879 0.856 1.812561 8.12 8.465 151.416 152 131.3442 30/4/1999 13/08/1999 Partco Group PLC 836.365 0.411 213.5542 6 7.222 343.746 288.57 0.635842 11/5/1999 16/06/1999 Dentmaster Holdings PLC 11.15339 1.669 14.64933 10.27 12.509 18.615 18.48 2.206187 14/5/1999 28/07/1999 Hillsdown Holdings PLC 4747.356 0.278 30.18568 6.18 9.489 1,319.77 863.18 24.26342 18/5/1999 29/07/1999 Crown Leisure PLC 148.4909 0.22 3.275987 2.23 9.056 32.668 13.57 17.74212 21/5/1999 20/08/1999 Greycoat PLC 61.80231 11.771 14.99535 24.1 24.227 727.475 453.67 27.26266 26/5/1999 26/08/1999 Salehurst PLC 50.48684 0.608 8.957436 9.37 10.252 30.696 33.48 1.583883 26/5/1999 25/06/1999 Denby Group PLC 61.54809 1.206 16.77965 4.95 6.123 74.227 65.2 19.0578 27/5/1999 18/08/1999 Symonds PLC 76.27511 0.687 1.208108 5.85 8.171 52.401 47.65 1.580866 28/5/1999 6/7/1999 Warner Howard PLC 39.40545 1.946 7.509812 4.57 6.485 76.683 85.17 8.065151 7/6/1999 3/8/1999 Aspen Group PLC 86.82734 0.139 1.372624 9.99 nm 12.069 12.93 59.28756 23/6/1999 9/8/1999 Sinclair Montrose Healthcare 184 0.391 14.83988 9.58 14.052 71.944 48.98 6.983576 23/6/1999 13/08/1999 Carisbrooke Shipping PLC 11.7582 0.823 6.971151 7.05 18.977 9.677 8.05 0.707453 29/6/1999 17/09/1999 Adscene Group PLC 100.6736 1.449 7.030615 9.83 13.93 145.876 92.73 26.91428 30/6/1999 1/11/1999 Bridport PLC 42.32033 1.102 0.299396 6.69 7.763 46.637 47.8 134.6889 8/7/1999 9/8/1999 Vymura PLC 64.09397 0.713 17.25043 6.5 8.898 45.699 45.55 23.15799 14/7/1999 26/08/1999 Craig & Rose PLC 7.790576 0.191 10.49304 4.97 9.745 1.488 1.26 14.70974 14/7/1999 3/9/1999 Inn Business Group PLC 87.3821 1.832 20.23594 9.28 9.719 160.084 107.39 7.061173 15/7/1999 24/09/1999 Banner Chemicals PLC 52.46519 0.316 7.717494 1.58 1.624 16.579 18.3 35.24537 16/7/1999 29/09/1999 CrestaCare PLC 140.4422 1.255 9.916869 8.71 11.988 176.255 110.36 23.64809 20/7/1999 18/08/1999 Calderburn PLC 45.52999 0.717 16.04721 4.23 4.861 32.645 42.86 32.48658 18/8/1999 16/09/1999 Scottish Highland Hotels PLC 46.98965 1.739 11.11215 8.24 9.166 81.715 60.97 50.93498 20/8/1999 24/09/1999 LIBERfabrica PLC 198.5151 0.464 64.49077 5.74 9.444 92.111 58.97 0.319991 27/8/1999 15/11/1999 Norbain PLC 132.5176 0.483 67.49781 5.76 7.194 64.006 59.98 1.211076 3/9/1999 15/11/1999 Pentland Group PLC 627.337 0.991 2.007422 9.64 11.964 621.691 788.59 5.097768 10/9/1999 26/01/2000 Highland Distillers PLC 424.0336 2.913 5.13537 18.3 20.256 1,235.21 980.63 5.908061 17/9/1999 30/11/1999 S Lyles PLC 28.23626 0.182 1.439419 2.56 4.106 5.139 5.82 90.52136 24/9/1999 3/12/1999 Riva Group PLC 134.436 0.594 7.942562 15.55 22.585 79.855 68.58 1.088274 28/9/1999 20/12/1999 Market Link Publishing PLC 7.914068 1.315 7.163922 7.23 8.258 10.407 7.94 34.51574 29/9/1999 9/12/1999 Jones Stroud (Holdings) PLC 89.4 0.43 0.972917 4.84 10.077 38.442 54.19 248.9128 5/10/1999 22/12/1999 Cussins Property Group PLC 79.49336 0.602 27.43772 6.68 7.192 47.855 38.28 10.93209 26/10/1999 14/01/2000 Jardinerie Interiors PLC 11.83944 1.065 29.46987 12.96 23.262 12.609 10.4 9.840769 17/11/1999 24/03/2000 Wardle Storeys PLC 173.5401 0.985 18.97156 6.23 7.585 170.937 184.2 9.193381 22/11/1999 22/12/1999 Lambert Fenchurch Group PLC 164.5631 0.856 16.19427 4.78 6.083 140.866 212.16 6.214865 25/11/1999 14/01/2000 Epwin Group PLC 207.7178 0.411 19.09628 4.5 7.576 85.372 71.76 9.396221 26/11/1999 1/2/2000 Money Controls PLC 122.4035 1.155 7.60721 8.73 10.432 141.376 138.84 51.44173 3/12/1999 24/01/2000 Sanderson Group PLC 116.2812 1.547 10.92604 9.42 10.934 179.887 183.25 1.940301 9/12/1999 10/2/2000 Sidney C Banks PLC 516.3191 0.094 265.6035 6.38 11.448 48.534 39.62 0.394991 16/12/1999 29/03/2000 Apollo Metals PLC 187.7487 0.561 3.642889 9.64 12.202 105.327 84.25 12.87716 17/12/1999 18/05/2000 United Biscuits(Holdings)PLC 3162.286 0.745 12.49075 8.87 13.362 2,355.90 2,023.59 1.867841 17/12/1999 28/02/2000 Q Group PLC 11.90411 4.067 1.532911 13.29 14.621 48.414 44.58 7.642861 22/12/1999 18/02/2000 ANS PLC 206.8072 0.607 3.86283 10.05 11.72 125.532 45.75 448.9008 7/1/2000 31/03/2000 Recycling Services Group PLC 47.4902 0.153 3.62961 4.74 11.259 7.266 3.46 42.89669 13/1/2000 4/2/2000 Moorepay Group PLC 13.39524 4.911 60.13132 17.03 20.479 65.784 67.68 24.92262 14/1/2000 14/04/2000 CPL Aromas PLC 76.75459 0.436 32.92517 9.22 14.626 33.465 23.59 5.851641 28/1/2000 27/04/2000 Ugland International Holdings 249.4695 1.116 62.17435 4.63 7.089 278.408 136.75 1.10376 11/2/2000 4/5/2000 Wassall PLC 509.081 1.765 29.78959 27.29 nm 898.528 1,007.90 4.186914 14/2/2000 8/6/2000 Finelist Group PLC 1325.337 0.395 14.62854 8.42 11.683 523.508 253.38 29.98311 18/2/2000 28/04/2000 Allied London Properties PLC 67.50725 6.275 2.826471 14.22 14.453 423.608 141.88 2.095005 3/3/2000 20/07/2000 Joseph Holt PLC 35.78425 1.905 10.72923 4.66 5.414 68.169 93.07 59.86574 14/3/2000 16/06/2000 Greenway Holdings PLC 50.98143 0.377 1.068063 6.8 14.255 19.22 11.94 97.20181 15/3/2000 15/06/2000 Goodhead Group PLC 98.06746 0.756 58.70881 6.91 14.82 74.139 43.4 0.147615 6/4/2000 12/6/2000 Criterion Properties PLC 21.58612 2.09 20.9821 42.24 48.894 45.115 14.53 3.458499 10/5/2000 11/9/2000 Hogg Robinson Group PLC 3018 0.128 4.455034 6.58 8.779 386.304 354.97 16.46509 18/5/2000 25/09/2000 James Finlay PLC 278.5265 0.623 9.632836 8.27 13.424 173.522 149.83 5.073393 19/5/2000 21/07/2000 CNC Properties PLC 52.12423 4.041 8.582299 47.28 49.665 210.634 83.46 6.394376 6/6/2000 24/08/2000 Queensborough Holdings PLC 130.9852 0.542 6.645396 7.37 11.562 70.994 34.72 23242.52 19/6/2000 22/08/2000 Furlong Homes Group PLC 68.75877 0.684 4.396694 5.48 5.679 47.031 35.11 3.525282 20/6/2000 15/09/2000 Ward Holdings PLC 42.62694 0.965 9907.578 6.19 7.142 41.135 51.66 0.062733 23/6/2000 8/8/2000 Lumination PLC 60.38587 0.881 2.128772 12.1 22.217 53.2 42.91 107.4687 27/6/2000 27/06/2000 British Telecommunications PLC 28042.57 3.314 17.59204 9.38 15.62 92,933.08 91,492.43 58.95857 30/6/2000 29/08/2000 Shani Group PLC 24.0754 0.252 25.87351 2.85 3.632 6.067 11.08 7.447359 5/7/2000 8/9/2000 Eskmuir Properties PLC 84.64094 5.3 49.90309 25.5 25.566 448.597 203.7 43.07097 5/7/2000 23/08/2000 Raglan Properties PLC 140.2426 1.142 10.44437 6.19 6.223 160.157 77.51 0.667286 11/7/2000 17/08/2000 Regal Hotel Group PLC 309.5618 1.043 133.3313 6.47 7.472 322.873 134.14 3.73157 20/7/2000 14/09/2000 Industrial Control Services 593.24 0.025 3.95861 1.42 2.859 14.831 2.55 65.85916 7/8/2000 25/10/2000 McKechnie PLC 1129.926 0.826 42.16399 7 9.959 933.319 645.25 4.933132 10/8/2000 18/10/2000 British Mohair Holdings PLC 30.57876 0.857 20.13892 6.62 11.22 26.206 32.38 1.510321 1/9/2000 21/12/2000 Wickes PLC 777.4506 0.506 38.35266 9.33 16.792 393.39 422.14 0.863965 5/9/2000 27/09/2000 Bostrom PLC 303.9554 0.269 4.590702 4.06 6.087 81.764 56.01 31.37244 8/9/2000 2/10/2000 Dawsongroup PLC 203.9239 1.025 1.761832 5.45 19.116 209.022 85.83 1091.285 22/9/2000 8/12/2000 Ambishus Pub Co PLC 54.73113 0.848 17.17049 10.11 11.952 46.412 23.51 2.38565 28/9/2000 2/11/2000 Utilitec PLC 5.663804 1.63 61.80822 5.24 nm 9.232 19.37 16.33467 29/9/2000 31/10/2000 Linden PLC 170.6611 0.658 4.071376 6.54 6.653 112.295 106.62 148.4297 26/10/2000 11/12/2000 Bernard Matthews PLC 556.7319 0.675 90.94029 6.08 8.03 375.794 332.57 14.82306 2/11/2000 18/01/2001 Stat-Plus Group PLC 28.9296 0.767 42.9401 5.45 7.76 22.189 25.61 1.780875 3/11/2000 21/12/2000 Powell Duffryn PLC 608.962 1.238 90.26683 8.29 10.046 753.895 733.97 0.886629 15/11/2000 27/12/2000 Peter Black Holdings PLC 323.1575 1.067 5.75503 8.03 9.419 344.809 319.19 34.0834 24/11/2000 8/2/2001 Frogmore Estates PLC 678.6728 0.81 6.017308 6.09 6.12 549.725 409.29 73.87181 5/12/2000 16/02/2001 Brooks Service Group PLC 52.3607 0.743 17.84631 6.76 9.959 38.904 37.88 6.613253 5/12/2000 8/2/2001 Lilleshall PLC 63.42568 0.444 46.8537 4.68 6.919 28.161 28.52 17.74245 8/12/2000 13/02/2001 Burford Holdings PLC 73.88759 17.045 4.886373 70.57 71.497 1,259.41 706.61 83.68982 18/12/2000 27/03/2001 Perkins Foods PLC 491.4503 0.593 87.19529 6.22 8.908 291.43 222.87 3.463951 19/12/2000 26/01/2001 BLP Group PLC 164.4079 0.277 137.5927 9.32 26.1 45.541 14.54 1.389406 21/12/2000 29/01/2001 Fairview Holdings PLC 278.9812 1.594 9.66377 5.1 5.185 444.696 454.31 25.56507 22/12/2000 13/03/2001 Hepworth PLC 785.2212 1.153 10.90991 6.58 8.694 905.36 1,023.21 16.50719 29/1/2001 20/03/2001 Nightfreight PLC 156.3634 0.377 39.97441 6.1 8.448 58.949 51.32 6.710751 16/2/2001 1/6/2004 Pilkington's Tiles Group PLC 170.5634 0.071 28.15523 1.11 1.572 12.11 5.7 6.956248 8/3/2001 22/05/2001 Mid Kent Holdings PLC 99.08369 1.876 6.64926 4.65 6.344 185.881 154.35 2.873483 12/3/2001 8/6/2001 Anglian Group PLC 351.9403 0.62 24.48184 7.75 11.784 218.203 236.47 0.519325 14/3/2001 6/6/2001 H Young Holdings PLC 310.717 0.159 8.9284 7.43 13.752 49.404 24.33 78.71027 16/3/2001 18/06/2001 Expamet International PLC 162.4784 0.556 0.84379 3.69 4.445 90.338 99.1 2756.252 30/3/2001 20/06/2001 Regalian Properties PLC 88.29195 2.61 69.49483 25.81 26.658 230.442 119.48 0.942539 23/4/2001 1/6/2001 Golden Land Investments PLC 1.073229 10.952 29.58088 13.93 16.013 11.754 1.24 4.959039 30/4/2001 2/7/2001 Doncasters PLC 1205.573 0.558 11.363 9.68 13.751 672.71 521.33 112.081 10/5/2001 7/8/2001 Cannons Group PLC 125.2226 3.756 6.209836 15.9 20.888 470.336 368.89 15.60031 19/6/2001 16/08/2001 Time Products PLC 37.67955 1.345 42.23162 4.46 5.024 50.679 112.09 8.53743 28/6/2001 2/8/2001 Bentalls PLC 155.8569 0.559 24.31415 14.03 33.628 87.124 100.24 3.400747 4/7/2001 5/10/2001 Britax International PLC 536.3333 1.026 45.78909 13.03 49.304 550.278 620.49 0.179445 13/7/2001 25/09/2001 Oasis Stores PLC 192.7341 0.41 6.554401 3.25 5.26 79.021 76.07 9.052489 19/7/2001 19/10/2001 Dewhirst Group PLC 524.4088 0.296 0.941026 3.39 4.835 155.225 160.9 6.151749 20/7/2001 14/09/2001 Heal's PLC 37.95005 0.981 3.435424 5.68 7.09 37.229 47.28 163.0371 10/8/2001 1/10/2001 Seacon Holdings PLC 6.850667 0.75 0.421436 5.46 57.108 5.138 15.68 38.65921 17/8/2001 3/12/2001 PGA European Tour Courses PLC 13.22756 4.223 21.56583 16.26 20.647 55.86 50.93 1.92746 1/10/2001 21/11/2001 Clipserver PLC 2.042136 2.041 0.789474 9.89 nm 4.168 10.93 505.2573 5/10/2001 19/12/2001 WT Foods PLC 247.4032 0.625 4.768597 7.17 11.032 154.627 105.98 5.296819 9/10/2001 28/11/2001 Bowness Leisure PLC 3.681818 1.1 18.60266 5.13 6.392 4.05 3.9 11.2645 16/10/2001 20/12/2001 Fortnum & Mason PLC 54.82851 1.382 2.904167 15.89 29.511 75.773 83.08 #DIV/0! 24/10/2001 29/01/2002 Brockhampton Holdings PLC 40.21165 2.438 4.529643 5.27 7.953 98.036 89.33 #DIV/0! 23/11/2001 12/2/2002 Princedale Group PLC 2.862423 0.487 #DIV/0! 0.48 0.681 1.394 21.56 #DIV/0! 14/12/2001 21/01/2002 TGI PLC 75.94611 0.334 #DIV/0! 5.6 8.848 25.366 21.56 #DIV/0! Appendix 2 – Blackstone’s Private Equity acquisitions Investment Year Company Description TDC 2005 In December 2005, Blackstone together with a group of firms, including Kohlberg Kravis Roberts, Permira, Apax Partners and Providence Equity Partners, acquired Tele-Denmark Communications). The firms acquired the former telecom monopoly in Denmark, under the banner Nordic Telephone Company (NTC) for approximately $11 billion. Equity Office Properties 2006 Blackstone completes the $37.7 billion acquisition of one of the largest owners of commercial office properties in the US. At the time of its announcement, the Equity Office buyout became the largest in history, surpassing the buyout of HCA. It would later be surpassed by KKR's buyout of TXU. Vornado Realty Trust bid against Blackstone, pushing up the final price. Freescale Semiconductor 2006 A consortium led by Blackstone and including the Carlyle Group, Permira and the TPG Capital completed the $17.6 billion takeover of the semiconductor company. At the time of its announcement, Freescale would be the largest leveraged buyout of a technology company ever, surpassing the 2005 buyout of SunGard. The buyers were forced to pay an extra $800 million because KKR made a last minute bid as the original deal was about to be signed. Shortly after the deal closed in late 2006, cell phone sales at Motorola Corp., Freescale's former corporate parent and a major customer, began dropping sharply. In addition, in the recession of 2008-2009, Freescale's chip sales to automakers fell off, and the company came under great financial strain. Michaels Stores 2006 Blackstone, together with Bain Capital, acquired Michaels, the largest arts and crafts retailer in North America in a $6.0 billion leveraged buyout in October 2006. Bain and Blackstone narrowly beat out Kohlberg Kravis Roberts and TPG Capital in an auction for the company. Nielsen Company 2006 Blackstone together with AlpInvest Partners, Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts and Thomas H. Lee Partners acquired the global information and media company formerly known as VNU. Orangina Sold[] 2006 Blackstone, together with Lion Capital acquired Orangina, the bottler, distributor and franchisor of a number of carbonated and other soft drinks in Europe from Cadbury Schweppes for €1.85 billion Travelport 2006 Travelport, the parent of the travel web site Orbitz.com, was acquired from Cendant by Blackstone and Technology Crossover Ventures in a deal valued at $4.3 billion. The sale of Travelport followed the spin-offs of Cendant's real estate and hospitality businesses, Realogy Corporation and Wyndham Worldwide Corporation, respectively, in July 2006. (Later in the year, TPG and Silver Lake would acquire Travelport's chief competitor Sabre Holdings.) Soon after the Travelport buyout, Travelport spun off part of its subsidiary Orbitz Worldwide in an IPO and bought a Travelport competitor, Worldspan. United Biscuits 2006 In October 2006 Blackstone, together with PAI Partners announced the acquisition of the British biscuit producer. The deal was completed in December 2006. Biomet 2007 Blackstone, Kohlberg Kravis Roberts, TPG Capital and Goldman Sachs Capital Partners acquired the medical devices company for $11.6 billion. Hilton Hotels Corporation 2007 Blackstone acquired the premium hotel operator for approximately $26 billion, representing a 25% premium to Hilton's all-time high stock price. The Hilton deal, announced on July 3, 2007 is often referred to as the deal that marked the "high water mark" and the beginning of the end of the multi-year boom in leveraged buyouts. The company restructured its debt in 2010. This information was retrieved from: http://en.wikipedia.org/wiki/Blackstone_Group on 2nd Feb 2011 Read More