Global private equity firms are sitting on more than $2.1 trillion in “Dry Powder.” Their investment decisions and purchasing power will shape the public and private investment markets in ways that shape the future of the global economy. DailyAlts provides constant updates and insights on deal-making, regulatory shifts, global capital flows, and more.
The monthly transaction report from the $280 billion New York State Common Retirement Fund showed an investment outlay of more than $4 billion in June. Significantly, and in a sign of the times, more than 75% of that was plowed into alternatives such as real estate ($2.2 billion) and private equity funds (over $1 billion).
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More Stories on Private Equity
Private equity and alternative investments manager Apollo Global (APO) was very active in the first quarter.
The firm opened or added to 35 stocks while reducing or eliminating just 17 potions in the quarter.
We know from their conference call that they also were big buyers of high-grade corporate bonds in the quarter. According to Apollo executives, they have already sold most of those for fairly large profits, but they tend to be a longer-term holders of equity positions. They tend to take concentrated positions as 90% of the $7.5 billion public equity portfolio is in the top ten holdings.
Kohlberg Kravis and Roberts (NYSE: KKR) reported their public equity holdings to the SEC this week. While most of their largest positions are companies that own a controlling interest after a buyout and partial IPO, their buying and selling activities in a given quarter can provide valuable insight into their current thoughts.
In this guest post from Kunal Shah and Tatiana Esipovich at iCapital Network, the authors explain how secondary funds offer the potential for diversified private equity exposure and an attractive risk profile. By: Kunal Shah and Tatiana Esipovich The secondary private equity market comprises the buying and selling of preexisting investor commitments to private market funds….
The COVID-19 crisis has hammered yet another company. This time, Commonwealth Bank of Australia said it had to book about $970 million in provisions to cover expected losses in the third quarter.
To generate some cash, it sold a majority stake in its wealth management division to private equity firm KKR (NYSE: KKR).
The KKR conference call for the first quarter occurred on Wednesday morning. Executives at the firm revealed that although they were stung a little by the economic upheaval, KKR continues to prove its business model.
The company exited some businesses early in the quarter at an average of 3.5 times the initial cost. Although they are working remotely like the rest of us, KKR, in the 2-month window from March 1 through May 1, has closed on or in legal documentation on over $10 billion of new commitments across our fund platform.
KKR (NYSE: KKR) had a massive Q1 loss on GAAP measures as a result of mark to market requirements.
Setting aside those marks, the firm said that After-tax Distributable Earnings and After-tax Distributable Earnings Per Adjusted Share were $355.3 million and $0.42, respectively, for the quarter ended March 31, 2020. After-tax Distributable Earnings Per Adjusted Share are 11% higher compared to the first quarter of 2019.
“Since February, we have seen more uncertainty and volatility than at any time since the financial crisis. KKR navigated the quarter well, and our results bear testament to the strength of our business model. We are enormously proud of the dedication of our employees and believe we are well-positioned to help our clients and communities for what lies ahead,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-CEOs in their statement.
Apollo Global Management (NYSE: APO) reported earnings for the first quarter of 2020. Apollo reported an accounting loss for the quarter thanks to mark-to-market accounting regulations. That said they generated Fee-Related Earnings of $228.1 or $0.52 per share.
Apollo Global also declared a dividend of $0.42 a share. Apollo intends to distribute to its Class A common stockholders quarterly substantially all of its distributable earnings after taxes and related payables over amounts determined by the executive committee of its board of directors to be necessary or appropriate to provide for the conduct of its business and, at a minimum, a quarterly dividend of $0.40 per share.
They have paid out more than twice the minimum dividend over the past year.
The board of directors at ICANN rejected the sale of the .org registry to private equity firm Ethos Capital. The possible $1.135 billion deal effectively died today after months of debate over the decision to transfer the registry from the non-profit Internet Society (ISOC) to Ethos. Many advocates pressing against the deal argued that it would saddle the company with debt and force it to raise prices on users of these internet addresses.
Private equity firm KKR is continuing to invest across Europe during the global economic shutdown with a stake in Mirastar.
In its latest move, KKR is taking a stake in the developer, investor, and manager of industrial and logistics assets in Europe. Initially and Mirastar have acquired a 49,000 sqm forward funding project in the Netherlands. They intend to continue working together to assemble a portfolio of high quality industrial and logistical assets in gateway cities in Western Europe.
Blackstone earnings (NYSE:BX) arrived before the bell Thursday. While the private equity firm fell short of analyst expectations, the firm still managed to generate significant cash flows in the quarter. The firm said that they had produced Distributable earnings during the first three months of the year of $.46 a share. The consensus Wall Street…
Although oil prices have risen today, the price of oil remains at historically low-price levels. This is an opportunity for deep-pocketed private equity firms that own a diversified portfolio of companies.
However, it is a calamity for those funds that specialize in energy investing.
Victoria’s Secret had a new majority owner in Sycamore Partners. However, the private equity firm is trying to walk away. As a result, shares of L Brands (NYSE:LB) – the current owner – plunged more than 20%.
McVey outlines his thoughts in his latest report titled Keep Calm and Carry On. He expects the economy to see a sharp downturn during the second quarter. McVey also expects more of a U-shaped recovery than a V-shaped one. He thinks that the economy may experience sustained demand issues as a result of the massive wave of unemployment in the United States and Europe. He does suggest that the increased unemployment benefits will offer full income replacement or many households allowing demand to at least maintains at a decent, but lower pace.
Global consulting firm McKinsey & Co. has published a study that examines what private equity firms can do to outperform their peers during times of crisis. They examined what high performing private equity firms did during the Great Financial Crisis of 2008-2009 did to achieve outstanding results. The consultants who worked on the project suggested…
KKR is suspending its efforts to exit its investment in Goodpacks, a Singapore based supply chain solutions company. While the company’s primary container leasing business to food and rubber companies has remained steady with little to no impact form the coronavirus economic slowdown, the bids received by KKR were far beyond what the private equity…
Leon Black made a rare appearance in the media yesterday. The co-founder of alternative asset manager Apollo Global Management (NYSE: APO) appeared on CNBC along with Aramark (ARMK) CEO John Zillmer. During the conversation, the two discussed their NYC Health Heroes program. Aramark, the world’s largest U.S.-based provider of food, facilities, and uniforms, partnered with Mr….
Private equity funds could face a huge hit to valuations as of the end of the third quarter, according to MSCI Research.
Using their private equity valuation model, they determined some private equity funds could take a Q1 write-down of portfolio companies by as much as 35%.
Investors who recently compiled their year-end valuations may have a false sense of security right now. Many could be shocked in a few months when they realize the devastation of the first quarter.
Private equity-backed Envision Healthcare is struggling to deal with the dramatic loss of revenues. Patients have turned to telehealth resources and canceled ambulatory surgeries. Envision provides medical staff to hospitals and operates surgery centers and is owned by KKR (NYSE: KKR). The company has seen its business drop by about 70% in a very short period of time. More than 90 of its centers are closed because of the spread of the coronavirus across the United States.
The private equity industry is losing the fight to gain access to bailout funds provided under the stimulus package passed to help businesses recover from the economic impact of the coronavirus.
The funds are only available to companies with less than 500 employees.
While private equity firms own lots of businesses that would qualify for the funds, the legislation bundles all their affiliated companies and counts them as just one company making them ineligible for loans from the Small Business Administration.
Apollo Global Management Co-Founder Marc Rowan sent a letter to the firm’s investors this weekend that suggests that if the Fed does not take drastic measures, the economy will be in danger of collapsing.
Silver Lake Partners is going big with its latest fund.
The technology-focused private equity fund wants to raise a new fund worth $16 billion.
Raising funds as market prices have been collapsing is a solid strategy. It will give the PE an enormous amount of capital to buy companies at distressed prices. With losses mounting in current portfolios, however, one must wonder if institutional investors will step up and make new investments.
TSG Consumer Partners announced that it has acquired a majority stake in Pathway Vet Alliance. The consumer-focused PE shop purchased the assets from Morgan Stanley Capital Partners funds. The current management at Pathway will remain in place as part of the deal.
Dave and Busters (NASDAQ:PLAY) have been hard hit by the economic downturn.
The restaurant and arcade company closed its stores across the United States. It furloughed at least 15,000 hourly team members, store management, and corporate staff. Meanwhile, it cut the compensation of the senior leadership team by 50 percent.
And the Board of Directors has suspended Directors’ cash compensation for the remainder of the year.
So… what next?
KKR & Co (NYSE: KKR) has shelved a plan to sell Singapore-based Goodpack, a Singapore based shipping containers, and logistics services.
They had bids for the company that was said to be as high as $2 billion, but buyers have pulled back as the spread of the virus has made the company much less attractive at that price level.
This is one example of active triage on portfolio companies and dealing with the limitation of getting things done when under a lockdown order in may cities.