Traditionally venture capital (“VC”) firms looking to add potential portfolio companies have been unwilling to sign non-disclosure agreements (“NDAs”) during initial discussions with entrepreneurs about their technologies and execution strategies. This unwillingness from VC firms to sign NDAs stems from a number of reasons, “including a desire to avoid restricting their ability to seek out…
Category: Blog Articles
PE Firms Managing Tax Rates: Is the Management Fee Waiver Legal?
Private equity firms are no strangers to controversy when it comes to their compensation arrangements. In the most recent presidential election, Mitt Romney and the entire private equity industry came under intense scrutiny from both the electorate and politicians for the tax rate paid on carried interest. Carried interest is taxed at the capital gains…
Zombies of the Private Equity Industry Pt. I
Private equity funds have begun to slowly show the positive results of fundraising efforts – the capital raised in 2013 is up 20% compared to what was raised in the same period in 2012.1 Although the results of industry fundraising are improving, the amount of time needed to raise those funds is continuing to grow….
Shareholder Adviser Responds To Silicon Valley Governance
Oracle Corporation, like many Silicon Valley tech companies, makes no secret about wanting to do things differently.1 But their different approach to corporate governance is now getting an angry response. On Tuesday, October 8th, CtW Investment Group, which advises union sponsored pension funds and is a substantial shareholder of Oracle Corporation, issued a letter to…
Potential Change in Private Equity Manager’s Compensation Structure
Carried interest: “a share of any profits that the general partners of private equity and hedge funds receive as compensation, despite not contributing any initial funds. This method of compensation seeks to motivate the general partner (fund manager) to work toward improving the fund’s performance.”1 For private equity managers, this profit is usually taxed as…
General Solicitation and the New Wave of Private Securities Offerings
What makes a sale of securities a “private” offering as opposed to a “public” offering? The primary distinction is that firms who make public offerings seeking equity investors must register with the Securities and Exchange Commission (SEC). On the other hand, private securities offerings are defined as those that do not need to formally register…
Trends in Healthcare Investment
Historically, healthcare has been an attractive area for private equity investment due to strong returns and low default rates.1 In the future, it should remain attractive and continue to be a stable sector for investment. It is unlikely there will be any decrease in the demand for healthcare in the near future, especially with America’s…
Convertible Notes & Why They Might Be Good For Your Startup
So you need to secure funding for your startup, but you are not sure you want to give up equity right away, especially because you do not want to put a value on your company too early. You also are not sure what your company is even worth and would like more time in order…
A Flash of Light in a Dark Holding Environment? Apollo’s Resuscitation of the Quick Flip
The peak purchase prices private equity firms secured immediately prior to the financial crisis have left many firms stuck with poor exit options after portfolio valuations plunged in the aftermath of the crisis. The decrease in portfolio valuations resulted in increased holding times across the private equity industry as profitable exit options disappeared.1 For example,…
Private Equity Funds and the Use of Group Annuity Contracts to De-Risk the Pension Obligations of Portfolio Companies
Private equity firms acquiring portfolio companies with defined benefit pension schemes often overlook the financial risks associated with these funds.1 For private equity firms, the opportunity to realize additional value through efficient risk management of the pension fund by de-risking is an important consideration facilitated by the passage of the Pension Protection Act of 2006…