THE ANNUAL REVIEW 2010 - PEI Media
THE ANNUAL REVIEW 2010 - PEI Media
THE ANNUAL REVIEW 2010 - PEI Media
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page 22 private equity annual review <strong>2010</strong><br />
s to r i e s o f t h e y e a r<br />
j a n | f e b | m a r | a p r | m a y | j u n e | j u ly | a u g | s e p | o c t | n o v | d e c<br />
s e c o n d a r i e s<br />
Going to the bank<br />
A pair of over-sized secondary transactions illustrated<br />
a trend of banks withdrawing from the asset class<br />
Bank of America: backing away<br />
from private equity<br />
The sale of private equity portfolios by banks hoping to<br />
relieve financial and political pressure was a significant<br />
theme in <strong>2010</strong> and two of the year’s most significant<br />
emerged in July.<br />
In Europe Lloyds Banking Group offloaded a majority<br />
stake in the 40 private equity assets it inherited when it<br />
subsumed Bank of Scotland’s Integrated Finance unit in<br />
2008. The spin-off was rebranded as Cavendish Square<br />
Partners, a joint venture 70 percent owned by secondaries<br />
firm Coller Capital and 30 percent owned by Lloyds..<br />
Coller won an auction process for the assets, beating out<br />
competition from Bridgepoint, 3i Group and Lexington Partners.<br />
Coller paid £332 million (€401 million; $502 million) for its stake in the joint venture, valuing<br />
the portfolio as a whole at approximately £480 million. This represented a “small premium to<br />
current book value” according to a press release at the time. Coller and Lloyds, which retained<br />
the remaining 30 percent, kept the existing BOSIF management team, led by Graeme Shankland,<br />
on to manage the portfolio.<br />
On the other side of the Atlantic, Bank of America was also working to reduce its private equity<br />
exposure. Bank of America sold $1.2 billion in commitments it had to Warburg Pincus-managed<br />
funds. Portions of Bank of America’s assets sold went to the China Investment Corp, which was<br />
seeking to build up its private equity book, and Lexington Partners. The July deal followed the<br />
sale of $1.9 billion of Bank of America’s private equity assets to France’s AXA Private Equity,<br />
which earlier in year itself had picked up a portfolio of private equity assets from French bank<br />
Natixis valued at €534 million.<br />
In a move also prompted by balance-book reshuffling, HSBC announced that it was actively<br />
considering management buyout offers for its various in-house private equity operations. Though<br />
much of the secondaries volume was tied to bank activity, wider market forces played a part in<br />
stirring activity. The chasm between bid-ask prices seen in 2009 began to narrow. As the second<br />
half of <strong>2010</strong> got underway, industry insiders were estimating annual secondary transactions would<br />
weigh in at a cumulative $20 billion to $30 billion, up from an estimated $10 billion seen in 2009. ■<br />
Think tank trouble<br />
Coverage of a negative<br />
report on private equity fired<br />
up a heated debate<br />
Apax Partners inked its debut Brazil deal,<br />
agreeing to acquire a 54 percent stake in Tivit,<br />
an integrated IT and BPO services company,<br />
for about $1 billion.<br />
Apax’s entrance into Brazil came at a<br />
time when private equity firms everywhere<br />
were looking for ways to get exposure to the<br />
country, either through deals, fundraisings or<br />
even picking up stakes in native Brazilian firms.<br />
The Carlyle Group started the year off<br />
with its debut Brazil deal, committing $250<br />
million for a 63.6 percent stake in CVC Brasil<br />
Operadore e Agencia de Viagens, an operator<br />
of tours and travel services in Brazil and<br />
throughout Latin America.<br />
DLJ South American Partners, which<br />
closed its debut fund in 2008 on $300 million,<br />
got in on the act and led an investor group<br />
that committed $370 million for a 25 percent<br />
stake in Grupo Santillana de Ediciones, which<br />
publishes educational text books in Latin<br />
America and Spain.<br />
First Reserve found an energy-related<br />
opportunity in the country, investing $500<br />
million in Barra Energia, an independent<br />
exploration and production company.<br />
Not to be outdone, The Blackstone Group<br />
chose to ramp up its presence in Brazil this<br />
year by taking a 40 percent stake in Sao Paulobased<br />
Patria Investments, one of Brazil’s<br />
largest asset managers. ■<br />
Registration, compliance looms large<br />
SEC registration became a reality for private equity funds<br />
After months of debate, the US Senate passed a version of the financial<br />
reform bill that would force private equity firms with more than $150<br />
million in assets to register with the US Securities and Exchange Commission<br />
by 21 July 2011. While venture capital firms escaped registration<br />
requirements, the legislative changes signed into law by President Barrack<br />
Obama required private equity firms to designate a compliance officer<br />
and face regular SEC inspections, as is already the case for US hedge<br />
funds. Foreign funds with more than 15 US-based limited partners also<br />
must register as an investment advisor with the SEC. It’s worth noting<br />
that even prior to passage of the legislation, the SEC had already formed<br />
an Asset Management Unit, charged with overseeing compliance for<br />
private equity funds and other alternative investments. ■
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