Ronald Kahn
Could that crazy law of unintended consequences be playing havoc with every LP’s dream of co-investing with their favorite GPs by actually lowering IRRs? Hard to imagine, but it could be true — at least for mezzanine funds.
Take five investment bankers, add three private equity professionals, throw in a couple of senior lenders and another few junior lenders, give each of them a company’s prior year’s audited financial statements, fifteen minutes with management, and ask each of them to tell you what the company’s EBITDA is. I can almost guarantee you that the number of different answers you’ll get will exceed the number of professionals considering the question.Â
The debate continues as to whether today’s financing environment is as good, or better, than in 2007. But we tend to believe that, at least from a liquidity standpoint, conditions are more favorable than they were back then. Not only is debt readily available but for the first time there are two, very distinct, cash flow-oriented structures available to mid-market borrowers.Â
A new year is always a good time for reflection and it can be especially prudent to look back and see if there were any trends that transpired during the past year that may affect the coming year. As we start 2013, two such trends that occurred in 2012 jump out.
During the last few weeks, three finance companies successfully completed the IPO process to become publicly traded business development companies (BDCs), committed to lending to the middle market. The fundraises promise to add to a large, growing war chest of capital available to finance mid-market buyouts.
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