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October 17, 2017 2 Comments Author: Andy Jones

Private Equity Investment Trends in Manufacturing

I ran some analytics on our private equity portfolio company data to view changes in how PE firms invest in various industries over time. The graph below shows the historical investment trend for manufacturing portfolio companies by year.

Investments in manufacturing companies, as a share of the overall private equity investment pool, has decreased, but seems to have settled around 15 – 17%.

Private Equity Investment Trend: Manufacturing

October 09, 2017 No Comments Author: Andy Jones

Smoothing the I-Bank Deal Flow Cycle

One of the challenges of managing a mid-market M&A firm is coping with the sporadic, binary nature of the payoff for your efforts. In an industry where the compensation for a deal is often a large lump sum or nothing at all, it’s critical to manage both the company’s internal cash flow and the work-flow roller coaster for the firm’s team.

Below, I discuss various ways investment banks may smooth their cash flow cycle.

October 04, 2017 No Comments Author: Andy Jones

Private Equity Holding Periods – Histogram (updated)

I previously discussed the trend in median holding periods for private equity-owned portfolio companies. However, there is a significant standard deviation in the data.

The histogram below shows the distribution of holding periods for portfolio company exits in 2017 YTD.Private Equity holding periods - histogram

While the data looks much like a normal distribution for holdings periods 0 – 8 years, there’s an unusual bump up in years 8 – 10. Read my previous explanation about this effect related to the recession of 2008 – 2010.

Also, a large portion of the longest held investments (12+ years), were European private equity firms holding European portfolio companies. Cultural difference.

October 02, 2017 No Comments Author: Andy Jones

Interview – Dante Fichera with Independent Investment Bankers

We recently interviewed Dante Fichera, the owner and operator of Independent Investment Bankers Corp. (IIB), a registered broker-dealer and FINRA/SIPC member that supports investment banking professionals engaged in mergers & acquisitions and capital raising activities. As a broker dealer, Dante shared his firm’s strategy to help investment bankers succeed and his thoughts on the overall outlook for M&A.

September 28, 2017 No Comments Author: Andy Jones

The Difference Between a Stock Option and a Warrant

Stock options and warrants are very similar financial instruments but differ in a few key ways.

The key differences:

  1. Trading – stock options are financial instruments that transact between two, non-principle parties, where as a warrant is issued (created) by the underlying company itself.
  2. Existing vs New Shares – when stock options are traded, they are based on existing company shares. However, when a warrant is traded, it is based on new shares created by the company. A warrant is therefore an option and an issuance of a new underlying share.
  3. Duration – while stock options typically only have 2-3 year maximum durations and most often trade within the range of a few months, warrants can last 10 years or more.
September 27, 2017 No Comments Author: Andy Jones

Private Equity Holding Periods Trending Down

Holding periods for PE-owned portfolio companies correlate with macro-economic events – lengthening during recessionary periods and shortening during growth & recovery years.

The most recent data from shows median portfolio holding periods continue their slight downward trend as private equity firms capitalize on higher valuations.

Private Equity Holding Periods

  • Current = 5.0 years, (2017 YTD)
  • Peak = 5.7 years, (2014)
  • Low = 3.0 years, (early 2000’s dot com boom… although it went down to 3.5 years in 2008 as well)