Wharton Private Equity Review: Navigating the Challenges Ahead

[link01]

good article that came out of a privat equity conference sponsored by wharton.

 

here are the topics:

 

The Coming 'Wall' of Refinancings: A Trial for Private Equity Firms -- and Their Portfolio Companies

 

Continuing Defaults by Private Equity Portfolio Companies Transform the Middle Market

 

'True Turnaround Specialists' Are Poised to Survive in Today's Challenging Private Equity Market

 

Private Equity Secondary Funds: Are They Players or Opportunistic Investors?

 

India and China Offer Attractive Private Equity Opportunities, but Without Majority Control

 

the topic that caught my eye was 'True Turnaround Specialists' because i've suspected for a long time that there are alot of cowboys & pretenders in the PE space who it would still be more accurate to call LBO firms & pseudo activists.

 

 

<<...Michael Psaros, managing director at KPS Capital Partners, pointed out that cash usually isn't available to leverage in distressed situations. Most of the companies that his firm looks at have managers who are "catastrophic failures" and need to be replaced with new leadership, or a chief restructuring officer, to begin to create value. "That's our world," said Psaros, who added that after 20 years in the corporate restructuring field he had never seen so few true competitors in the business. "That's because it is hard. It is as different from the traditional LBO model as you can imagine."

 

...Psaros notes how, in many cases, a management change can drastically alter a company's prospects. "Sometimes all we have to do is change out a CEO and everybody below him just blossoms. On the other hand, we have literally had to fire everybody down to the shop floor level. Those two extremes are fascinating." He warned against buying into stereotypes about the management style of turnaround specialists. "Most people assume that the successful manager of a turnaround is a high-testosterone, chest-pounding professional. We have seen individuals with that kind of personality be successful, but we have also seen bookish, cerebral and methodical managers be equally successful. There's really no pattern." The key to managing a turnaround, he said, is to develop a plan and stick to it day by day, to ratchet up expectations. "Big-picture professionals have no place in a turnaround." >>

 

http://knowledge.wharton.upenn.edu/special_section.cfm?specialID=89