Private equity and its impact / Spencer J. Fritz, editor.

Format:

Book

Contributor:

Fritz, Spencer J.

Series:

Business issues, competition and entrepreneurship series.

Business issues, competition and entrepreneurship series

Language:

English

Subjects (All):

Private equity--United States.

Private equity.

Leveraged buyouts--United States.

Leveraged buyouts.

Physical Description:

1 online resource (181 p.)

Edition:

1st ed.

Place of Publication:

New York : Nova Science Publishers, c2009.

Language Note:

English

Summary:

This work looks at the increase in leveraged buyouts (LBO) of US companies by private equity funds prior to the slowdown in mid-2007 which has raised questions about the potential impact of these deals.

Contents:

Intro

PRIVATE EQUITY AND ITS IMPACT

CONTENTS

PREFACE

Chapter 1PRIVATE EQUITY: RECENT GROWTH IN LEVERAGEDBUYOUTS EXPOSED RISKS THAT WARRANTCONTINUED ATTENTION*

WHAT GAO FOUND

WHY GAO DID THIS STUDY

WHAT GAO RECOMMENDS

ABBREVIATIONS

RESULTS IN BRIEF

BACKGROUND

Private Equity-Sponsored LBOs Have Evolved Since the 1980s

Overview of an LBO Transaction by a Private Equity Fund

POSITIVE IMPACT ON THE FINANCIAL PERFORMANCE OF ACQUIREDCOMPANIES, BUT LBOS WERE ASSOCIATED WITH LOWEREMPLOYMENT GROWTH

Private Equity-Owned Companies Usually Outperformed Similar Companies Based on Several Financial Benchmarks

Private Equity LBOs Seek to Enhance Performance through Techniques Such as Improving Management Incentives

Private Equity-Sponsored LBOs Were Associated with Lower Employment Growth, but Causation Is Difficult to Establish

CLUB DEALS HAVE RAISED QUESTIONS ABOUT COMPETITION, BUTOUR ANALYSIS OF SUCH DEALS, IN THE AGGREGATE, SHOWS NONEGATIVE EFFECT ON PRICES PAID

Club Deals Have Grown Substantially in Recent Years, Especially Those Involving Large LBOs

LBOs Commonly Involve a Competitive Process and Club Deals Could Support or Undermine this Process

Our Analysis Indicates that Public-to-Private Club Deals, in Aggregate, Generally Are Not Associated with Lower or Higher Prices Paid for Target Companies, and the Private Equity Marketplace Is Predisposed to Perform Competitively

Some Large Club Deals Reportedly Have Attracted the Interest of the Department of Justice and Have Prompted Lawsuits against Some Private Equity Firms

SEC EXERCISES LIMITED OVERSIGHT OF PRIVATEEQUITY FUNDS, BUT IT AND OTHERS HAVE IDENTIFIEDSOME POTENTIAL INVESTOR-RELATED ISSUES

Private Equity Funds and Their Advisers Typically Qualify for an Exemption from Registration with SEC.

SEC Examinations of Registered Advisers to Private Equity Funds Have Identified Deficiencies in Some Compliance Controls

Growth in Private Equity-Sponsored LBOs Has Led to Greater Regulatory Scrutiny

RECENT CREDIT EVENTS RAISED REGULATORY SCRUTINY ABOUTRISK-MANAGEMENT OF LEVERAGED LENDING BY BANKS

Major Commercial and Investment Banks Have Played a Key Role in Financing U.S. LBOs

Before 2007, Federal Banking Regulators Generally Found Risk Management for Leveraged Financing to Be Satisfactory

SEC Began to Supervise Financing of LBOs by Investment Banks around 2005

2007 Market Events Increased Risk Exposures of Banks that Financed LBOs and Raised Some Concerns about Systemic Risk that Warrant Regulatory Attention

Pursuant to Recent Credit Market Problems, Regulators and Others Have Raised Concerns about the Risk Management of Leveraged Finance

CONCLUSIONS

RECOMMENDATION FOR EXECUTIVE ACTION

AGENCY COMMENTS AND OUR EVALUATION

APPENDIX I: OBJECTIVES, SCOPE, AND METHODOLOGY

Determining the Effect of Recent LBOs on Acquired Firms and Employment

Assessing the Impact of Club Deals on Competition

Reviewing SEC's Oversight of Private Equity Fund Advisors and Funds

Reviewing Financial Regulatory Oversight of Bank LBO Lending Activity

Addressing Pension Plan Investments and Taxation on Private Equity Fund Profits

APPENDIX II:PENSION PLAN INVESTMENTS IN PRIVATE EQUITY

APPENDIX III: OVERVIEW OF TAX TREATMENT OF PRIVATE EQUITYFIRMS AND PUBLIC POLICY OPTIONS

Private Equity Firms Receive Two Types of Income, and They Are Taxed Differently

Tax Treatment of Carried Interest as a Capital Gain Is Subject to Debate

Several Bills Have Been Introduced and Other Ideas Suggested to Change the Tax Treatment of Private Equity Firms' Income

APPENDIX IV: CASE STUDY OVERVIEW

APPENDIX V: NEIMAN MARCUS GROUP, INC., CASE STUDY.

Overview

Background

Acquisition

Strategy and Implementation

Results

Exit

APPENDIX VI: HERTZ CORP. CASE STUDY

Overview

The Acquisition

APPENDIX VII: SHOPKO STORES, INC., CASE STUDY

APPENDIX VIII: NORDCO, INC., CASE STUDY

APPENDIX IX: SAMSONITE CORP. CASE STUDY

APPENDIX X: ECONOMETRIC ANALYSIS OF THEPRICE IMPACT OF CLUB DEALS

RESULTS

Data Sample Was Created Using the Dealogic Database with Additional Fields from SEC's Edgar, LexisNexis and Audit Analytics

Econometric Modeling Procedures

Variables Included in the Model

APPENDIX XI: COMMENTS FROM THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

APPENDIX XII: COMMENTS FROM THE SECURITIES AND EXCHANGE COMMISSION

APPENDIX XIII: COMMENTS FROM THE OFFICE OF THE COMPTROLLER OF THE CURRENCY

BIBLIOGRAPHY

REFERENCES

Chapter 2PRIVATE EQUITY'S EFFECTS ON WORKERS AND FIRMS, HEARING BEFORE THE COMMITTEE ON FINANCIAL SERVICES, U.S. HOUSE OFREPRESENTATIVES,MAY 16, 2007

STATEMENT OF ANDREW L. STERN, PRESIDENT, SERVICE EMPLOYEES INTERNATIONAL UNION

STATEMENT OF JON L. LUTHER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, DUNKIN' BRANDS INC.

STATEMENT OF DOUGLAS LOWENSTEIN, PRESIDENT, PRIVATE EQUITY COUNCIL

STATEMENT OF DR. ROBERT H. FRANK, JOHNSON GRADUATE SCHOOL OF MANAGEMENT, CORNELL UNIVERSITY

INDEX.

Notes:

Description based upon print version of record.

Includes bibliographical references and index.

Description based on print version record.

ISBN:

1-61470-619-0

OCLC:

768121241