Private Equity’s Key Role in Recent Pension Fund Growth

In the past few weeks, some of the largest pension funds in the U.S. have reported exceptional returns for the past fiscal year. And this is good news for members of the pension funds because after several years of dismal performance, a good year is welcome news indeed.

According to press reports, California’s two giant pensions had tremendous years with post-fiscal-year returns that each topped 20 percent. The $154.3 billion California State Teachers’ Retirement System (CalSTRS), said its 23.1 percent return was “remarkable,” adding that it was its best performance in 25 years. Meanwhile, the $237.5 billion California Public Employees Retirement System (CalPERS) posted a 20.7 percent return, the best since 1997.

In addition, New York’s Common Retirement Fund (NYCRF) has grown to $146.5 billion, “its highest point since markets crashed in 2008,” state Comptroller Tom DiNapoli said. The fund, which provides benefits for more than a million state and municipal employees and retirees – generated a 14.6 percent rate of return for the 2010-11 fiscal year, which ended March 30. The fund grew about $6 billion since the end of 2010.

How to Find & Retain People for Jobs No One Wants

Let’s all be honest here. Every company has them, jobs that are so “miserable” that it is almost impossible to find anyone to do them. And if you are lucky enough to hire someone for that miserable job, you then have to work really hard to retain them.

I use the word “miserable” here as a term to describe those jobs that you probably wouldn’t want to do yourself but usually are critical and vital for the your daily operations to run smoothly. The sad reality is that these jobs are usually some of the most important you could fill because the role is critical in keeping your business functioning.

So how do you do it?

Deal Structure Flexibility Will Help You Sell Your Business

It was recently announced that WRM America Holdings, a specialty lines property and casualty insurance and risk management holding company, had agreed to acquire the flood insurance business of Fidelity National Financial for $210 million. Fidelity National Financial’s flood and excess flood business – Fidelity National Indemnity Insurance Company (“FNII”) – will operate as a wholly owned subsidiary of WRM America.

WRM, a portfolio company of Aquiline Capital Partners, is a new A.M. Best A- rated specialty property and casualty insurance company created by Wright Risk Management, a respected insurance management company. According to the press release:

“The addition of the largest provider of federal flood insurance through the NFIP to the WRM America family of companies is another step in our continued growth as a specialty lines insurance company, is representative of our dedication to current and future public-private partnerships, and considerably increases our fee-for-service offering,” said William Fishlinger, CEO and Chairman of WRM America.”

So here we have another great example of a synergistic acquisition of a private equity firm’s portfolio company. But what got my attention in this transaction was the deal structure.

Finding A Buyer For Your Business Across The Globe With A Cross-Border Deal

M&A activity is truly global now and it has been for some time. Given how interconnected the world economy is, the barriers that country borders have to complicate deal closings are now being hurdled like never before. Buyers are all over the world.

This was clear in a recent deal announcement that I reviewed. Pacific World, a portfolio company of Levine Leichtman Capital Partners (LLCP), acquired Fing’rs Europe, a provider of nail and beauty care products in Europe. Pacific World is located in Lake Forest, Calif., and provides similar products under the Nailene, Fing’rs, Revlon, and Bio Oil brands.

Private Equity Banks More Capital

As we have discussed in prior articles, equity funds are currently sitting on a sizable amount of dry powder (dry powder refers to capital raised that is unspent and available for investing purposes). In fact, a few months ago it was reported that equity firms had nearly $500 billion stocked away looking for deals to invest in.

So I find it really interesting that despite already sitting on a significant amount of dry powder, equity firms continue to have little trouble raising additional funds. According to Dow Jones, 201 U.S.-based private equity funds collectively raised $64.7 billion in the first half of the year, a 35% increase in capital committed over the $47.8 billion raised by 225 funds during the first half of 2010.

4 Fundamental Reasons Why Corporate Buyers Buy

In an earlier article published on this site, we quoted management guru Peter Drucker who said, “The buyer rarely buys what the seller thinks he’s selling.”

This quote accurately sums up the difficulty you may have trying to find a buyer for your business via your own efforts. You are too close to your company – and if you are like most business owners, you know all too well what your company needs to improve. Because of this, most middle-market entrepreneurs under-sell their company’s core capabilities and spend too much time focusing on their weaknesses when approaching the market.

Betting Big on Heavy Construction

It was recently announced that Summit Materials had acquired six companies:

  • Elam Construction
  • Grand Junction Concrete Pipe
  • Fischer Quarries
  • B&B Resources
  • Triple C Concrete
  • Wind River Materials

It always peaks my curiosity when I see a company announce this many acquisitions. So I did a little digging. Turns out that Summit Materials is a “platform company” and was formed by a group of investors, including The Blackstone Group and Silverhawk Capital Partners, in 2009. The goal of the platform company is to acquire companies in the “aggregates and heavy-side building materials sector,” according to Summit’s release.

Middle-Market PE Firms Create Win-Win Scenarios

Recently it was announced that FedCap Partners, LLC, a private equity fund, through its holding company National Security Partners, Inc., had acquired Point One, LLC and FuGEN, Inc. The combined entities will collectively be called Point One after the acquisition.

Headquartered in Arlington, Virginia, Point One provides cyber security policy development, as well as strategic planning and operations support to the U.S. Intelligence and Defense Community.

Knowing that this niche is a very hot M&A sector, I decided to do a little research on FedCap Partners. It turns out that FedCap is a classic middle-market focused investment firm; but unlike many middle-market professional investors who are typically industry agnostic, FedCap has a very defined industry focus.

In Genuine Scooters (yes…scooters) a PEG sees the future, not a fad

Those of you that read this publication religiously know that deals are frequently announced that catch my eye.  And when they do, I usually introduce them in this forum because of some unique feature that I think might be of interest to you as well.

A few weeks ago another deal closing announcement got my attention.  At the time, I thought, wow, what a unique investment. It wasn’t until a few weeks later when reading about the premiere of the new Tom Hank’s movie, Larry Crowne that it all began to make sense.

M&A Activity and Strategic Players

As we have indicated before, M&A activity has made quite a comeback so far in 2011. With strategic players flush with cash and credit flowing, it is not surprising that deals are once again resurging.

In fact according to Dealogic, spending on M&A increased nearly 33% in the first quarter of 2011 over the prior year, reaching $608 billion. And most of that activity was driven by strategic acquirers.