It’s been nearly one year since the Institutional Limited Partners Association (ILPA) released a set of “best practices” for structuring private equity funds. This was hardly the first attempt to better align interests between GPs and LPs, but was the one that seems to have prompted the most discussion among market professionals.
In preparation of the anniversary, market research firm Preqin decided to examine whether the principles are having a tangible effect on fund structure. The results were decidedly mixed.
Preqin examined all funds of 2009 and 2010 vintage, including those in market and many that actually launched before the ILPA principles were released last September. Yes, that last part is a major methodological flaw — particularly since it includes around three-quarters of the analyzed funds — but the research still gives a good reflection of where things stand today.
The group found that a majority of global funds meet the ILPA recommendation of using an “all contributions-plus-preferred-return-back-first model,” but that the figure drops to just 48% when looking at North Americanfunds (47% go “deal-by-deal”).
When it comes to fee-sharing, 39% of funds follow the ILPA recommendation that 100% of “transaction, monitoring, directory, advisory and exit fees” accrue to limited partners. But most GPs still take a big slice, including 28% that rebate 80%, and 26% that rebate between 50% and 59 percent.
Ninety-seven percent of funds reduce their management fee after the investment period concludes, while only 4% follow an ILPA recommendation that would allow no-fault divorces by vote of two-thirds of LP interests (58% put the threshhold at 80%).
Finally, Preqin reported that 13% of surveyed LPs “would dismiss an opportunity to invest in a fund based solely on its non-adherence to the Principles.” Interesting stat, but it doesn’t quite jive with only 4% of funds following the no-fault divorce clause (unless that 13% of LPs only invested in those 4% of funds over the past two years).
It’s too bad that Preqin didn’t compare these figures to fund structures from earlier vintages, but my sense is that any pro-LP changes have been driven more by macro-fundraising issues than by ILPA activism.
To me, the ILPA principles are well-intentioned, but ultimately get used as two things:
1. An excuse. As in: “We’re not investing in your fund because you don’t follow the ILPA principles.” Now the LP probably wouldn’t have invested anyway, but this is much easier to say than: “We don’t like you very much.”
2. A peer-pressure tool for LPs to use when negotiating. As in: “You might think this proposed term is crazy, but it’s been ratified by ILPA.” This also works for GPs, when trying to show good faith. Helpful, but hardly a cudgel.
North American Breweries Inc., a portfolio company of KPS Capital Partners, has acquired Independent Brewers United Inc., a craft brewer responsible for the Magic Hat brand. No financial terms were disclosed.
Trilantic Capital Partners is looking to sell Phoenix Brands, maker of detergents like Fab and Ajax, according to Bloomberg. Barclays Capital will manage the process. www.trilanticpartners.com
RealPage Inc., a Carrolton, Texas-based provider of online property management systems for the multi-family housing market, has raised $135.3 million in its IPO. The company priced12.3 million shares at 1$11 per share, compared to plans to offer 13.5 million shares between $13 and $15 per share. RealPagewill trade on the! Nasdaq under ticker symbol RP. Credit Suisse and Deutsche Bank Securitiesservedas co-lead underwriters. The companyhas raised over $40 million in VC funding since 2003, from Apax Partners (26.4% pre-IPO stake), Advance Capital Partners (6.9%), Camden Partners (4.7%) and Leeds Equity Partners. www.realpage.com
Swift Biosciences Inc., an Ann Arbor, Mich.-based developer of molecular biology reagents for research and diagnostic applications, has raised $3 million in Series A funding led by DFJ Mercury.
Nephera, an Israeli developer of medival devices for patients suffering from congestive heart failure, has raised $2.85 million in second-round funding. Backers include Aurum Ventures, Evergreen Venture Partners and the Trendlines Group.
AirStrip Technologies, a San Antonio-based developer of mobile medical software, has raised an undisclosed amount of VC funding from Sequoia Capital.
EcoATM, a San Diego-base! d provider of in-store solutionsthat capture, track and recycle mobile devices, has raised an undisclosed amount of VC funding from Coinstar Inc. (Nasdaq: CSTR).
Red Ventures, a Fort Mill, S.C.-based provider of online marketing services, has raised an undisclosed amount of growth equity funding from General Atlantic.
SpotterRF, an Orem, Utah-based developer of micro-surveillance radar technology, has raised an undisclosed amount of funding from In-Q-Tel.
AEA Investors announced that it has acquired a stake in Shoes for Crews, a provider of, from Advent International and the Smith family. No financial terms were disclosed. peHUB had previously reported on the deal.
Arta Capital and L Capital Partners have agreed to acquire a 27.9% stake in Pepe Jeans, for €85 million. Sellers include Spanish private equity firm Torreal and Pepe management, which will end up holding 31% and 30% of the company, respectively.
Barilla has agreed to sell Kamps, a German bakery chain, to ECM Capital Management. No financial terms were disclosed. www.ecm-pe.de
Barnes & Noble Inc. (NYSE: BKS) is in talks with Yucaipa Cos. to end a lawsuit over the company’s board of directors. The bookseller ! recently put itself up for sale, drawing interest from private equity firms.
The Coding Source LLC, a Los Angeles-based provider of clinical coding, audit and compliances services to health plans and healthcare providers, has secured an undisclosed amount of growth equity funding from Parthenon Capital.
RWE, a German utility, has put its Thyssengas gas transmission network up for sale.
SBI-Macquarie Infrastructure Fund has acquired an 11% stake in Indian mobile tower company Viom Networks, for $304 million. SBI-Macquarie is a joined venture of State Bank of India and Australia’s Macquarie Group.
New Century Transportation Inc., a Westampton, N.J.-based motor carrier, has filed for a $120 million IPO. It plans to trade on the Nasdaq, with Wells Fargo Securities and Stifel Nicolaud Weisel serving as co-lead underwriters. The company reports a net loss of $5.14 million for 2009, on $229 million in revenue. Shareholders include Jefferies Capital Partners. www.nctrans.com
Avago Technologies (Nasdaq: AVGO) said that it has withdrawan a secondary public offering of 24.84 million ordinary shares, due to “adverse market conditions.” Avago shareholders include KKR and Silver Lake Partners.
ISE Corp. (TSX: ISE), a Poway, Calif.–based provider of hybrid-electric drive systems and components for heavy-duty vehicles, has filed for Chapter 11 bankruptcy protection. This comes less than a month after the company announced layoffs, and six months after going public in Toronto. Prior to its IPO, ISE has raised around $55 million fromNGP Energy Technology Partners, RockPort Capital Partners, Siemens Venture Capital, Macquarie Clean Technology Fund and DTE Energy Ventures. www.isecorp.com
Firms & Funds
Onex Corp. (TSX: OCX) reported that Q2 profits slipped from the year-ago period, but its earnings per share beat analyst estimates.
J. Frank Mermoud has joined Monument Capital Group as a managing director. He previously was a partner with TD International.