Private equity pays up

A new index shows private equity firms paying more for businesses than private and public company counterparts.

There are many different yardsticks for measuring the burgeoning profile of private equity. One might take into account, for example, the number of high-profile public companies coming into contact with private equity firms for the first time. Another measure is the amount of attention now being given to the asset class by the media, politicians, unionists and regulators. Arguably a less obvious, but still informative, indicator of progress is the number of private equity indexes now being produced.

Most of these have tended to focus on private equity performance. But a new Private Equity Price Index (PEPI) from UK financial services firm BDO Stoy Hayward instead tracks the price/earnings (PE) ratios of deals involving a private equity buyer. The PEPI index is retrospective, taking in private equity deals dating back to 2001. This enables comparison of the prices paid in private equity deals compared with BDO's existing indexes for private company sales and listed non-financial company sales over the same period.

The most striking aspect of this comparison, as can be seen from the graph below, is that private equity deal P/E ratios have been higher than private and public company equivalents over the last year (an average of ten percent higher compared to the public benchmark). This is the first period since 2001 that private equity deals have been more expensive than both of the other benchmarks. In the wake of the dotcom fallout at the beginning of 2002, P/E ratios for private equity deals were 20 percent lower than public company comparables.

BDO Stoy Hayward corporate finance partner Jon Breach, who compiles the index, highlights three main reasons why private equity firms can now pay the highest prices: a shortage of high quality assets coupled with record levels of funds raised; aggressive offers put out by debt providers to fund deals; and the use of competitive auction processes.

Pond Venture Partners names COO
Pond Venture Partners has announced the appointment of Jaques du Preez to the position of chief operating officer. The UK-based early stage technology investor said it hired du Preez to bolster its back office activities and provide counsel on financial, accounting and operating advice to the firm's portfolio. Du Preez first came to the UK as part of Accenture, and after some initial work in regional offices, moved to London to work as part of the firm's business launch center there. Most recently, he worked with start-up funds, providing them with outsourced back-office facilities. ?Pond was looking for someone with good operational strengths, but critically, experience working with start-ups was a must,? said Charles Irving, founding partner of the firm. Pond Ventures leads seed and A round investments, including silicon, software, hardware, wireless, materials, systems and the intersection of these areas with energy and medical devices.

KRG hires Meyer for IR
Denver-based KRG Capital Partners, a middlemarket buyout firm, has hired Dale Meyer away from placement agent Probitas Partners. At KRG Meyer will lead fundraising for the firm's next fund, to be launched soon. The fund will target more than $1 billion in commitments. KRG's last fund closed in 2005 with $715 in capital commitments. Meyer will be based in KRG's New York office. This will be the fourth KRG fundraising that Meyer has advised. While a placement agent at Bank of America, he helped the firm raise Fund I; in 2002, at JP Morgan Chase's placement group, Meyer raised KRG's Fund II; and as a placement agent with San Francisco-based Probitas, Meyer raised Fund III.

Perseus Realty hires fundraising chief
Washington, DC-based real estate investment firm Perseus Realty Capital announced the appointment of Jay Jarrett to head up the firm's new fundraising division. The division will focus on raising capital for established and emerging investment managers, real estate developers and operating companies. ?We are assembling a best-in-class team to further assist our client base with access to the institutional equity community, while helping them gain visibility and traction to future endeavors,? says Perseus president Paul Dougherty. Most recently, Jarrett led the investor relations department of the New Boston Fund, where he oversaw fundraising, client management and reporting.