Just when US private equity firms had gotten used to the idea that they would have to spend time and money preparing portfolio companies for the strictures of Sarbanes Oxley, along comes another rule for being public.
In January, the Securities and Exchange Commission issued proposed amendments to the disclosure requirements of publicly traded companies which, if enacted, will represent the most sweeping changes to compensation disclosure rules in more than 14 years.
According to a recent client memo from law firm Weil Gotshal & Manges, the proposed disclosures will force public companies to provide ?comprehensive but also comprehensible information? to shareholders about how the top executives of a company get paid. This means that, in plain English, public companies must state how the CEO, the CFO and the three other most highly paid executives are compensated. In addition, if any employees make more in compensation than the aforementioned top executives, three of them must also have their kimonos opened to the public.
In recent months, the unending public debate over executive compensation in the US has gained renewed momentum, as Christopher Cox, the new chairman of the SEC, has declared that too many corporations disguise valuable perks and other forms of compensation from public scrutiny.
According to the Weil memo, new disclosures would include, among other items, ?holdings of outstanding equity-related interests received as compensation that are potential sources of future gains, as well as gains realized on these interests during the last fiscal year.?
For example, a company would be required to report fairvalue estimates of any options an executive might hold.
Equity-related forms of compensation are, of course, extremely important to private equity investing. Management teams are often lured to private equity deals specifically because of the opportunity for huge upside in the event of an exit. As a private equity-backed portfolio company prepares to go public, the management team will also have to be prepared to have their net worth scrutinized by the public.
In the event of an acquisition, an earn-out arrangement may well make executives of the acquired entity higher in the comp rankings than the executives of the buyer entity, a condition that would lead to detailed disclosure.
Management teams that are squeamish about letting the world know how rich they've become need not apply to private equity.
Firm merger talks collapse
Preliminary discussions regarding a potential merger of GIMV and CapMan to create a pan-European mid-cap buyout focused private equity firm have been discontinued. GIMV said in a statement that ?preliminary discussions have taken place which did not lead to any agreement. Although today, it was suggested in the Belgian press that a transaction would still materialize, discussions have actually been discontinued.? A report in the Belgian daily De Standaard reported that GIMVwas planning a €250 million offer for Helsinki-based CapMan. GIMV, which acquired German mid-market private equity firm Halder in 2000, has made repeated announcements that it intends to develop a pan-European franchise.
TH Lee Putnam spinout adds operators
GRS Partners, the private equity firm that recently announced a spinout from New York-based TH Lee Putnam Ventures, an affiliate of Thomas H. Lee Partners, has added four operating partners. Bernie Andrews is the former CEO of Eyecare Centers of America; Allan Loren is the former chairman and CEO of Dun & Bradstreet; Kumar Mahadeva is the former chairman and CEO of Cognizant Technology Solutions; Phillip Riese was head of the American Express US Consumer Card business. GRS Partners was founded by Harvey Golub, Ramanan Ragavendran and Renny Smith, all of whom were senior professionals at TH Lee Putnam Ventures, which invests in technologyfocused companies. The new firm will make investments in business services companies, many of them with international components.
Survey: Lawyers, communication pros go in-house
An audience survey conducted at the 2006 North American Private Equity COOs and CFOs Forum in New York, found that almost half of private equity firm respondents now have in-house general counsel as well as communications and/or investor relations professionals. The survey, organized by Private Equity Manager, found that 48 percent of private equity firms have in-house investor relations/communications professionals. Of those firms that do have communications pros, 63 percent pay them more than $150,000 per year, 23 percent pay between $100,000 and $150,000, and 10 percent pay between $75,000 and $100,000. The survey also found that 41 percent of private equity firm respondents have a general counsel on staff.
AIG ends fight with former private equity pros
American International Group has reached a settlement with Peter Yu and William Jarosz, the former heads of its private equity arm. Both sides are claiming victory. The global insurance giant cut the pair loose in April 2005. Yu and Jarosz in the following months launched the emerging marketfocused Cartesian Group, with a targeted fundraise as high as $750 million, according to reports. AIG filed suit claiming the new fund broke a non-compete clause. Other allegations included claims of computer fraud and breach of fiduciary duty. Yu and Jarosz claimed to have been fired without cause, which obviated the noncompete clause. In a recent statement, AIG said it had resolved ?all outstanding disputes? between the firm and the former employees. A lawyer for Yu and Jarosz told Reuters that the two can now move ahead with their business.
CVC bolsters banking expertise
Leveraged finance specialist Alexander Fotakidis has joined CVC Capital Partners, having worked on three of the London firm's deals while at CIBCWorld Markets. Fotakidis joins CVCfrom US-based CIBC, where he spent five years working as part of the European leveraged finance group. At CIBC, Fotakidis was involved in arranging debt financing for leveraged buyouts and recapitalizatons, including three CVC transactions: the acquisition and merger of Germany's BASF Printing Systems and Sweden's ANI Printing Inks to form XSYS Print Solutions at the end of 2004; the subsequent merger of Stuttgart, Germany-based XSYS with US group Flint Ink Corporation in July last year; and the acquisition of AVR, the Netherlands' largest waste-management firm, in a deal valued at €1.4 billion ($1.67 billion) last month. The new appointment follows the recent promotions of Geert Duyck in CVC's European team and Adrian Mackenzie and Roy Kuan at CVC Asia Pacific to partners at the end of 2005.