Global private equity and venture capital news and research

Leading Edge

1 April 2008

Reverse break-up fees: the ultimate option? $

Many recent LBO merger agreements do not require the buyer to specifically perform its obligations, so a buyer’s right to walk and pay a reverse break-up fee is generally clear, writes Jack Boden of law firm Covington & Burling.

14 March 2008

Ignorance of the FCPA is no excuse $

Private equity sponsors and hedge funds are increasingly investing in emerging markets, including through dedicated investment funds. The risk of corrupt payments is higher in those markets than in most developed markets and US investors are subject to the U.S. Foreign Corrupt Practices Act (FCPA) in connection with those investments. Recently, the US government has become more aggressive in enforcing the FCPA, writes Weil Gotshal & Manges.

29 January 2008

The Global Economic Impact of Private Equity Report 2008 $

This collection of working papers is published by the World Economic Forum and is the result of collaboration with faculties at various academic institutions. The research finds that the total value of firms (both equity and debt) acquired in leveraged buy-outs is estimated to be $3.6tn from 1970 to 2007, of which $2.7tn worth of transactions occurred between 2001 and 2007. Many private equity firms have expanded dramatically in size and global reach and the sector has attracted attention from many other players, such as politicians, regulators and organised labour.

8 January 2008

The 144A equity offerings – potential new liquidity option for sponsors $

On 12 November 2007, a group of Wall Street firms and The Nasdaq Stock Market announced an intention to form The PORTAL Alliance, a trading platform designed to serve the market for 144A equity securities, write Corey Chivers and Alison Cole of Weil Gotshal & Manges.

15 June 2007

Why over-commitment is required to achieve target exposures to private equity $

With private equity moving from an alternatives asset allocation consideration to an extension of the equity asset class, many institutional investors are either initiating a new allocation to private equity or increasing their smaller allocations to a more meaningful portion of their portfolio. This paper from Fort Washington examines a method for initiating and reaching a target private equity allocation.

15 June 2007

Sponsored spin-offs: new spin on divestment strategy provides tax and other advantages $

A Q&A discussion with Mark Mandel about the sponsored spin-off structure. An unconventional and creative adaptation of the "tax-free spin-off" - whereby a parent company divests a business and new, publicly traded shares are distributed to its stockholders - is generating interest because of the tax and other advantages it can provide over the traditional spin-off. It's called the "sponsored spin-off" and involves a sponsor taking a minority albeit significant stake in the spun-off company.

21 May 2007

Winning management’s vote – alternative approaches to equity compensation $

Auctions have become a fact of life for private equity sponsors, says Weil, Gotshal & Manges, with most privately-held companies, even mid-market and smaller companies, being sold through some form of competitive process. Although management may not be able to direct the outcome of an auction, they usually have some influence and potentially a casting vote between competing bidders who are offering roughly similar prices for the business. In order to gain a competitive edge in an auction, private equity sponsors increasingly are trying to structure equity incentives in a tax-efficient manner for management.

20 December 2006

Visiting the private equity incubator obligation $

The world of private equity investments is probably the last big-yield frontier in terms of equity investments. As the financial markets become more complex and more sophisticated, the targets become smaller and yields are measured in basis point instead of percentages. Hence, funds are flocking to private equity to stay ahead of their targets. Venture funding at all stages is a primary target - lured by the potential of buying the next big thing for a few cents.

7 November 2006

Behavioural Economics and the world of private equity $

Behavioural Economics looks beyond assumptions on what is strictly "rational" decision-making as a field of study that combines psychology and economics in an effort to investigate occurrences in markets in which some of the agents display human limitations and complications. Private Equity is not a strictly rational business, therefore opportunities and risks arise from this reality in the industry.

25 October 2006

The accounting standards are changing: measuring fair value of private equity funds $

In this Israel Venture Capital Journal article, Kobi Shamash, CPA and Asher Shklar,CPA of Israeli accounting firm BDO Ziv Haft, look at the shift to fair value measurement of private equity assets that can make financial statements more relevant.

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