- by Hugh MacArthur, Graham Elton, Bill Halloran and Suvir Varma, leaders of Bain & Company’s Private Equity Group.
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Brian & the UBP Team
As a part of my work with PitchBook, I have been working closely with Doug Tatum founder and Chairman Emeritus of Tatum, the largest Executive Services firm in the U.S. and the Edward Lowe Foundation in creating the website, growtheconomy.org. This site illustrates the effect of Private Equity capital on employment and revenue growth by MSA across the country and results of the research are staggering: From 1995 – 2009, private capital-backed companies grew sales by 132.8%, while the United States grew sales by 28.0% and grew jobs by 81.5%, while all other companies in the U.S. economy grew jobs by 11.7%.
David Birch of Cognetics research and M. I. T. coined the term “Gazelles” to represent these companies. Gazelles are defined as companies growing at least 20% year over year for four years straight. There are no correlations with “small business” which though they represent the highest employment block, don’t actually grow employment, nor are they “high tech” which many Venture Capital investors hope to foster.
We often get the question as to why we’re doing this, and why in the Pacific Northwest. Well, the PSBJ just answered the question: in addition to Portland, Vancouver, and the rest of the PacNW, Seattle is home to close to 95,000 small businesses (ranked 13th in the country)!
Republished from My experience as a private equity CEO.
My experience as a private equity CEO
Armand F Lauzon Jr
02 Feb 2012
In the past 10 years, I’ve been the chief executive of three companies owned by the Carlyle Group, a major private equity firm. I’ve watched with interest, therefore, as the private equity industry in which Mitt Romney thrived has been portrayed as dedicated to corporate raiding, to profiting as it destroys. In the companies I’ve run and the private equity industry I’ve observed, nothing could be further from the truth
Private equity firms exist for one reason: to create value for shareholders, the largest percentage of which are public pension funds. Firms do this by finding and investing in underperforming businesses that have potential for growth.
What Private Equity Can Do for Your Company
Most business owners have heard all about venture capital funds as a source of funding for startups and early-stage companies. But what about more advanced profitable companies — where can they go for their millions?
Private equity — or “PE” — is the umbrella term for a broad range of funds that pool investors’ money together to increase their buying power. Unlike most mutual funds, in which fund shares trade on active public securities exchanges, private equity funds attract investors who are willing to hold shares in privately held, non-traded funds (hence the term private equity). These big-dollar private equity funds are trolling the business landscape for new investment opportunities — and that means you.
I was recently honored to participate in the Alliance of Mergers and Acquisitions Advisors’ annual M&A Market Update Panel. We had a lively conversation on where we saw the industry moving and if there was a recovery in sight. We unanimously concluded that, based on the high cash reserves of strategics and the overwhelming capital overhang in the private equity universe, this was going to be a banner year for corporate transactions. On the private equity side we see approximately $450 Billion in total unfunded commitments, with just under $232 Billion from the vintage years 2006-2008. If you lever this up 3.3x we’re looking at about 3/4 of a trillion dollars in deal flow over the next 2 years. Considering 2007, the most active year in Private Equity, saw $570 Billion in deal flow, the next two years will challenge that top spot.
With me on the panel were Steve Brady (National Managing Partner of Grant Thornton’s Transaction Advisory Services (TAS)), Graeme Frazier (Founder and President of Private Capital Research LLC), Charlie Welsh (Co-founder of Mergermarket) and Andy Schmucker (Managing Director, Head of Strategic Advisory, Head of Financial Sponsors Coverage for Janney Montgomery Scott LLC)
Another Year of Lethargic Growth in the Consumer Products Industry?
Friday Morning Dealmakers Column
Consumer spending, largely tied to employment growth, will likely maintain its slow uptrend in 2012. Interestingly, corporate profitability has increased sharply over the past two years reflecting rising worker productivity and an ability to pass through higher costs. However, few companies are willing to expand or invest due to inaction in Washington and fear of a further tightening in the regulatory environment. They seem inclined to only add to the workforce if and when there is a more defined upturn in business, rather than bear the burden of higher costs in anticipation of recovery. Thus, it seems a 2 percent real GDP growth is a reasonable expectation, followed by a similar increase in employment and consumer spending. Importantly, this does translate into higher retail sales, but a rising tide will not lift all ships. Market share will be an integral part of vendor and retailer sales growth this year.To learn more about this and other industry trends, register for “Consumer products: Deal successes, challenges and trends,” a webcast presented by McGladrey on Wednesday, Feb. 8, 2 p.m. EST, with guest speakers from PitchBook and Harris Williams.
We are Union Bay Partners. We invest in growth opportunities across stages and sectors where we have skills or expertise to help build enterprise value. We primarily target companies headquartered in the Pacific Northwest. We focus on business or consumer products and services.