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Funds: Overview

Overview

This note considers private equity funds, which during the past thirty years have gained attention for acquisition, aggregation, disassembly and sale of media groups.


It covers -

  • this page - an introduction to investment funds, some statistics and salient studies
  • activity - snapshots of equity funds such as Cinven, Apax, Providence Equity, Blackstone, Texas Pacific and CVC
  • fiascos - disappointments in aquisition and turnover of media groups by private equity
  • landmarks - highlights of acquisition and sale of media assets by such funds.

There is a more detailed discussion on the caslon.com.au site.

Broader figures on M&A are here.

Studies

Going Public: The Theory & Evidence On How Companies Raise Equity Finance (Oxford: Clarendon Press 1996) by Tim Jenkinson & Alexander Ljungqvist is one of the more interesting empirical studies of IPOs. The Theory of Corporate Finance (Princeton: Princeton Uni Press 2006) by Jean Tirole is outstanding, as is The Venture Capital Cycle (Cambridge: MIT Press 2000) by Paul Gompers & Josh Lerner and A History of Corporate Finance (Cambridge: Cambridge Uni Press 1997) by Jonathan Baskin & Paul Miranti. Gompers' brief historical overview is online.

Questions of motivation and rationality are explored in Bertrand Roehner's Patterns of Speculation (Cambridge: Cambridge Uni Press 2002), Andrei Schleifer's Inefficient Markets: An Introduction to Behavioural Finance (Oxford: Oxford Uni Press 2000), Hersch Shefrin's Beyond Greed & Fear: Understanding Behavioral Finance and the Psychology of Investing (Boston: Harvard Business School Press 2000) and Sian Owen's 2002 Behavioural Finance and the Decision to Invest in High Tech Stocks (PDF).

For points of entry into literature regarding regulatory issues see The New Financial Order: Risk in the 21st Century (Princeton: Princeton Uni Press 2003) by Robert Shiller, Daniel Ben Ami's Cowardly Capitalism: The Myth of the Global Finance Casino (New York: Wiley 2001) and Neil Fligstein's The Architecture of Markets: An Economic Sociology of Twenty-First Century Capitalist Societies (Princeton: Princeton Uni Press 2001). Memoirs by practitioners include Take On The Street (New York: Pantheon 2002) by former SEC chair Arthur Levitt.

For the LSE see Ranald Michie's The London Stock Exchange: A History (Oxford: Oxford Uni Press 1999) and The London and New York Stock Exchanges 1850-1914 (London 1987). NASDAQ is lauded in Mark Ingebretsen's Nasdaq: A History of the Market That Changed the World (Roseville: Prima 2003). Charles Geisst's Wall Street: A History (New York: Oxford Uni Press 1997) provides an upbeat introduction to 'the Street'. We prefer John Steel Gordon's more insightful The Great Game: The Emergence of Wall Street As A World Power (New York: Scribners 1999), Steve Fraser's Wall Street: A Cultural History (London: Faber 2005) and Howard Wachtel's Street of Dreams, Boulevard of Broken Hearts: Wall Street's First Century (London: Pluto Press 2003). David Kynaston's multi-volume The City of London (London: Chatto & Windus 1994-2001) examines global finance and London as a financial centre.

Individual funds have attracted attention because they are colourful or associated with high-profile deals (some of which are highlighted here). The popular literature is uneven.

Most attention has centred on Kohlberg Kravis Roberts (KKR) and a handful of US competitors such as Hicks Muse Tate & Furst (HMTF).

For KKR see in particular Connie Bruck's The Predators' Ball: The Inside Story of Drexel Burnham & the Rise of the Junk Bond Raiders (New York: Penguin 1989) and Barbarians at the Gate: The Fall of RJR Nabisco (New York: HarperBusiness 1991) by Bryan Burrough & John Helyar.

The New Financial Capitalists: Kohlberg Kravis Roberts and the Creation of Corporate Value (Cambridge: Cambridge Uni Press 1998) by George Baker & George Smith is an authorised study. It might be read in conjunction with George Anders' Merchants of Debt: KKR and the Mortgaging of American Business (New York: Basic Books 1992), superior to Sarah Bartlett's The Money Machine: How KKR Manufactured Power & Profits (New York: Warner 1991).

Two starting points in considering valuation are Aswath Damodaran's The Dark Side of Valuation (New York: Wiley 2001) and his 2000 paper The Dark Side of Valuation: Firms with no Earnings, no History and no Comparables: Can Amazon.com be valued? (PDF).