Archive for August, 2018

Twenty Fundraisers with Pulling Power

Posted by Muhammad Ibrahim Masudi

Who would you want to be working alongside if you had a pool of private debt capital to raise? From that question, we identified some of the industry’s key players you want on your team in our Rainmaker 20.

Some asset classes, such as private equity, have reached a level of maturity that makes raising vast pools of capital appear a straightforward task (it probably isn’t, it just looks that way). Others, such as agriculture, are just starting to attract LP dollars but have a long journey ahead before they become an established and meaningful portion of investor portfolios.

Private debt, meanwhile, is in a golden era of fundraising. It’s young enough as an asset class to have the potential for dramatic growth – as seen in last year’s record numbers when global capital raising soared above $200 billion – but not yet mature enough for investors to feel they have had their fill. There are some signs – amid concerns about competition and deal structures – of a slight reduction in appetite this year. But private debt remains a talking point, the asset class du jour.

In this promising environment, fundraising individuals have the chance to make their mark – and this inaugural PDI Rainmaker 20 acknowledges those who have done just that. So how did we arrive at the list? Our editorial team surveyed senior professionals across the globe asking them to nominate fundraising professionals. The question was simple: “If you were out there raising a fund, who would you want on your team and why?” Those who received the most nominations made the list. No one was allowed to nominate fundraisers from within their own organisation.
Respondents volunteered a spectrum of talented professionals, including firm founders, the young, the less young, those who have
shepherded multibillions into strategies and those who have focused on getting niche strategies off the ground. Some have been cited for their ability to work with certain types of investors or build relationships in particular parts of the world.

Nominations included in-house professionals and placement agents. It may come as a surprise to some that a clear majority of those nominated were inhouse. However, this reflects the way the asset class has developed as GPs have often taken their fundraising in-house, sometimes plucking placement professionals from banks or independent shops. Clearly it is possible to operate within an established private debt business and still be considered a “rainmaker” by one’s peers.

We hope you find the choices a compelling read. In future iterations of the survey we will be seeking to
grow the list further, in the process drawing more of private debt’s best fundraisers into the orbit.
Without further ado we present the PDI Rainmaker 20.

Edwin Chan, managing director, Probitas Partners
Based in Hong Kong and with 25 years of industry experience, Chan was an advisor to Alcentra on last year’s closings of its €690 million structured credit fund and €2.75 billion European Direct Lending Fund II. He has built deep relationships with both GPs
and LPs across Asia-Pacific, having previously been associate director for business development at AIG Investments.

Louis Colosimo, managing director, marketing & client relations for Southern US, ICG
Described as a “mentor” by some we spoke to and as “one of the best in US private debt” , Colosimo moved to ICG in October last year after eight years overseeing fundraising at Comvest Group, the mid-market private equity and credit firm. Hired to boost ICG’s local institutional investor coverage in the US, Colosimo also boasts a blue-chip banking past with JPMorgan and Morgan Stanley.

Enrique Cuan, managing partner and co-founder, Mercury Capital
Cuan was lauded by one market source for “his access and influence with potential LPs, particularly Asian investors which are, and will continue to get, more influential”. A member of Mercury’s executive committee, he was previously a managing director and head of international distribution for Merrill Lynch Private Equity Funds Group. Mercury collected the PDI 2017 award for Asia-Pacific placement agent of the year.


Public Pensions Flood Secondary Market with PE-Fund Stakes

Posted by Muhammad Ibrahim Masudi

Public pensions are loading up the secondary market with limited-partner interests in an environment of pricing as high as it’s ever been, according to Buyouts research and interviews with secondary-market sources.

At least five public systems are selling or considering sales on the secondary market: Maryland State Retirement and Pension System; Florida State Board of Administration; Los Angeles County Employees Retirement Association; Teachers Retirement System of Illinois and Pennsylvania State Employees’ Retirement System.

Colorado Public Employees’ Retirement Association is exploring options for both buying and selling stakes on the secondary market, Buyouts reported earlier this year.

It’s not unusual for several public pension systems to have portfolios on the secondary market, though this year activity seems to be stronger than usual, sources said.

Along with U.S. pensions, Canadian pensions have been active sellers on the secondary market. However, it’s not clear whether any Canadian pensions are shopping portfolios this year.

Public pensions and sovereign-wealth funds represented the largest percentage of sellers on the secondary market in the first half, about 20 percent, down from about 24 percent last year, intermediary Greenhill Cogent’s first-half secondary volume report shows.

The systems are taking advantage of the high-priced environment, according to Brian Mooney, managing director with Greenhill Cogent.

“Pricing is high and all types of LPs are continuing to actively manage their portfolios; including several large public pensions,” Mooney said. “This is consistent with what we’ve seen in recent years, except that 2018 is on a record pace.”

The average high bid for all secondaries strategies was 93 percent of net asset value in the first half, the volume report says. Buyout funds garnered the highest prices, at 98 percent of NAV, off slightly from 99 percent of NAV in 2017, the report said.

“Pricing is very strong; pricing is often above par for good-quality funds,” said Sabina Sammartino, partner and head of secondaries at Mercury Capital Advisors.

First-half deal volume came in around $32 billion, up 18 percent from the year-earlier period, Evercore said in its volume report. Total volume last year came in at an estimated $54 billion, Evercore said.

LACERA and Maryland could sell portfolios of LP stakes valued at up to $1 billion, sources have told Buyouts.

How much Florida or Pennsylvania state workers are trying to sell is unclear. Pennsylvania’s state workers’ pension, PA Public School Employees’ Retirement System, held a massive secondaries sale in 2014, unloading a portfolio of around $1.75 billion.

Illinois Teachers’, meanwhile, said in its 2019 private equity strategic plan that it would consider selling fund stakes next year, Buyouts reported.

“Market dynamics continue to be favorable for sellers of assets, offering TRS an opportunity to reshape its portfolio as desired, shed non-core managers, and pursue liquidity for the asset class,” the plan summary said.

AlpInvest Becomes First Outside Investor in Ex-Clinton Adviser’s Firm

Posted by Muhammad Ibrahim Masudi

AlpInvest Partners led a $260 million capital infusion in Stagwell Group, the investment firm launched by ex-Bill Clinton adviser Mark Penn, as part of a secondary process, the firms confirmed Tuesday.

Buyouts exclusively reported this month that AlpInvest was lead investor on the transaction. AlpInvest appears to have completed the deal on its own and was not part of an investor group.

Mercury Capital Advisors was intermediary on the transaction.

The firms released scant details about the deal. It’s not clear whether AlpInvest simply committed $260 million to the firm, bought interests from Stagwell’s original limited partner, Steve Ballmer, or took direct stakes in the prior portfolio.

An Aug. 14 news release from both firms said AlpInvest, which is owned by Carlyle Group, is the first outside investor in Stagwell since Penn launched it in 2015. Stagwell management will remain in place.

“The new investment will support Stagwell’s strategy of building a network of innovative marketing and research companies,” a statement from the firm said.

Penn launched Stagwell with backing from Ballmer, the former Microsoft CEO, to invest in marketing companies. The firm raised an initial $250 million with the ability to use leverage to make up to $750 million in acquisitions.

As of Dec. 31, 2017, Stagwell managed about $591.5 million in discretionary assets, according to the firm’s Form ADV dated June 19, 2018.

Stagwell has completed 17 investments since inception and is on track for more than $400 million in consolidated net revenue this year, the firms said.

Among Stagwell’s investments are consulting firm SKDKnickerbocker; marketing firm PMX Agency; public relations shop Wyecomm; creative agency Code and Theory; healthcare and consumer-marketing firm Scout; marketing agency Forward3D Group; marketing-
research firm Harris Poll; movie-marketing-research firm National Research Group; and online reputation-management company ReputationDefender.


Stagwell Media LLC Secures $260 Million Investment From AlpInvest Partners

Posted by Muhammad Ibrahim Masudi

WASHINGTON, Aug. 14, 2018 /PRNewswire/ — The Stagwell Group and AlpInvest Partners today announced the completion of a $260 million capital raise by Stagwell Media LLC from investment funds managed by AlpInvest Partners, a global private equity investor. Since its founding in 2015, Stagwell Group has completed seventeen investments and is on track for more than $400 million in consolidated net revenue this year. The new investment will support Stagwell’s strategy of building a network of innovative marketing and research companies.

“The marketing landscape is in the midst of a dramatic transformation and we are excited to have AlpInvest support our mission in creating a network of strategists and tacticians that is nimble and digital-centric, building a go-to resource for brands looking to succeed in today’s complex marketplace,” said Mark Penn, Managing Partner of the Stagwell Group. “We created Stagwell as a meaningful alternative to the holding companies, aptly named, since they have long been holding brands back from delivering on their full potential in a digital-first world.”

“Stagwell has demonstrated a superior operating model. Over the past three years, Mark and his team have built a highly attractive portfolio of world class digital-first marketing companies that drive significant results for brands,” said Michael Hacker, Managing Director, AlpInvest Partners.

“We are thrilled to support Stagwell through this secondary transaction at a key a moment in their development, as their portfolio continues to expand rapidly with exciting new capabilities and geographic reach that will allow Stagwell to compete on a global basis,” said Julian Rampelmann, Managing Director, AlpInvest Partners.

Management of the Stagwell Group remains the same. Further details of the transaction were not announced.

Mercury Capital Advisors served as the exclusive financial advisor to the Stagwell Group.


The Private Equity Boss Who has to Handle Elon Musk

Posted by Muhammad Ibrahim Masudi

Antonio Gracias, the Tesla lead independent director dealing with the madcap buyout proposal launched by Elon Musk this week, is a private equity investor who has profited from a decades-long association with the volatile billionaire.

The two are “close” friends, according to a Delaware court that is deciding whether the carmaker improperly bailed out another of Mr Musk’s companies two years ago, to both men’s alleged gain.

They are so close, in fact, that when the second Roadster rolled out of a Tesla factory in early 2008, Mr Musk made his fellow director a gift of the keys. Another man said he had paid $100,000 for the vehicle; the aggrieved customer, who happened to be Tesla’s ousted co-founder, claimed in a lawsuit that when he eventually took delivery of a substitute model, he found it had already been crashed, on purpose, into a truck.

Mr Gracias’ early business experience was a galaxy away from the ventures in rockets and self-driving cars that have catapulted an immigrants’ son from the provincial Michigan city of Grand Rapids into the orbit of a would-be superhero.

His first stab at private equity was a firm called M&G Capital. It lasted just five years.

We bought very difficult companies that needed a huge amount of turnaround effort
Alain Kodsi, who founded M&G capital with Antonio Gracias in 1995

“His mother’s name was Maria, my mother’s name is Georgette,” explained Alain Kodsi, who quit Goldman Sachs with Mr Gracias in 1995 to set up the shortlived venture. “It couldn’t be [called] GM because that would confuse people.”

There was nothing glamorous about the businesses they bought: a die company, a plater, a stamper, an injection moulder. “We bought very difficult companies that needed a huge amount of turnaround effort,” Mr Kodsi said. “Everything that we did was based on cash flow.”

Mr Gracias hankered for something more exciting. Yet even at Valor Equity Partners, which he set up in 2001 with the help of a small business loan from the federal government, the earliest deals involved a printer of plastic payment cards, a marketer of anti-wrinkle cream, and a rope factory.

The industrial brain of the operation was Tim Watkins, a British engineer who wore a ponytail and a bum bag (or “fanny pack” in his adopted home), and awed colleagues with his habit of glancing at some kind of goal-directed activity and summoning a mental diagram of a machine that could do it much faster.

But the tyres only started screeching when Mr Gracias revived a business relationship with Mr Musk, to whom he had been introduced in the 1990s by a law school classmate.

An investment in Tesla followed in 2005 and Mr Watkins set about re-engineering everything from a supplier’s metal-stamping factory in Switzerland to the US direct sales model. Valor sold its shares after the carmaker went public, but Tesla has disclosed that, as late as last year, Valor staff were helping out at a factory in Nevada.

Mr Gracias also committed money to Mr Musk’s rocket business, SpaceX. He is said to have had a financial interest in SolarCity when it merged with Tesla in 2016 in a transaction that drew a lawsuit from shareholders.

“Valor has shifted over the years,” said a person who has had long conversations with several senior executives. “[It used to] buy the most boring electric plating companies, apply lean manufacturing principles, and make them hum. Over the years, Antonio’s got more and more ingrained in the world of Elon and the Silicon Valley crowd. That’s become where I think he fancies the firm.”

Mr Gracias’s more expansive ambitions appear to have kindled an interest in politics; he has become a significant donor to Chicago mayor Rahm Emanuel.

Meanwhile, Valor last year raised $1bn for new investments, according to Preqin data, double the size of Mr Gracias’s previous fund, trading at least in part on connections with his billionaire friend. “If [clients] have excitement about the Elon Musk factor, it is a positive,” said Alan Pardee, managing partner at Mercury Capital Advisors, which marketed the new vehicle to investors. “If they feel uncomfortable for any reason, there are plenty of other things to talk about.”



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