Private Equity
The perception about private equity firms ranges from vultures, barbarians and flippers to job-creators and increasing a company’s net worth. Private equity firms typically invest in U.S. companies that are underperforming their industry peers. Investors in private equity only make money if they improve the performance of the companies invested in; private equity companies are last in line to be paid in case of insolvency. Private equity companies tend to use more incentive-based pay than other firms.
Private Equity Firms
The Good |
The Bad |
6.6% annualized returns over 5 years vs. -0.9% annual returns for stocks held by pension plans (Sept. 2011) |
2% annual fees + 20% of any profits |
Industry employs 8.1 million worldwide |
Borrowed money = 49% of buyout value |
In 2010, Apollo Global invested $1.5 billion in LyondellBassell; Apollo was worth $6.6 billion in early 2012 |
Annualized rates have fallen to single digits |
Bain Capital
Bain Capital: 10 Deals That Resulted in its Largest Profits [1984-1998]
Investment Date and Amont Bain Invested [in millions] |
Estimated Bain Gain |
What Happened |
Chap. 11 B/K |
Steel Dynamics [1994] $18m |
$85m |
Public in 1996 |
no |
American Paper & Pad [1992] $5m |
$102m |
Public in 1996 |
2003 |
DDi Corp. [1996] $41m |
$117m |
Public in 2000 |
2003 |
Experian Corp. [1996] $88m |
$164m |
Sold in 1996 |
no |
Physio Control [1994] $10m |
$168m |
Public in 1995 |
2000 |
Stage Stores [1988] $10m |
$175m |
Public in 1996 |
no |
Waters [1994] $27m |
$178m |
Public in 1995 |
no |
Dade [1994] $30m |
$186m |
Dividend |
2002 |
Wesley Jessen [1995] $6m |
$302m |
Public in 1997 |
no |
Italian Yellow Pages [1997] $17m |
$373m |
Sold in 2000 |
no |