This week in private equity:
Of Elevated Walleyes. From the “This Columnist Owns 4 Million Shares Of Microsoft” school of disclaimers, we must disclose a bias that we were once Epinions fanatics. So, the massive popularity of Yelp gave us a bit of that “we saw Kings Of Leon in ’03″ vibe. But we do enjoy how the army of Yelpers contemplates the many diners and burrito joints that escape the notice of highbrow reviewers more into truffles and molecular gastronomy. For the uninitiated, here’s the sort of Web 2.0 goodness the site offers, in this excerpt of a 2-star review of St. Paul, Minn., walleye-and-beer mainstay Tavern On Grand. “Aside from the bad picnic table cloths, hamburger buns/rolls, and rusty salad from a bag (I think Target has fresher stuff)… The Walleye was perfectly done. They should not bother to have anything else on the menu.” The company got a $25 million preferred stock investment from Elevation Partners, which may invest up to another $75 million to buy shares from employees and other stakeholders who want a little liquidity. Jeremy Stoppelman, Yelp chief executive and co-founder, said the investment “allows us to delay pushing to the public market and be more long term and flexible over the next few years.” While we’re not experts in portfolio-company synergies, there could be cost-savings between Yelp and another Elevation holding, Forbes magazine. Something like “Despite Darden Restaurants Inc.’s improved Ebitda, one analyst expressed concern over its 13.15 P/E ratio, and Debbie from Toledo said, “The breadsticks at 4th Street Olive Garden were RAD but the minestrone was totally cold 
”
Especially At Newark. Some people prefer to drive to the airport instead of taking environmentally-friendly mass transit or hitchhiking. Those people tend to pay a lot of money for parking, but that nonetheless wasn’t enough to save Parking Corp. of America Airports. The Macquarie Infrastructure Co.-owned business filed for Chapter 11 with a plan to sell its assets to Bainbridge ZKS – Corinthian Holdings LLC. Also filing for bankruptcy was Harvest Partners Inc.-backed personal care products company Natural Products Group, which plans to quickly restructure. Harvest reaped some $200 million in dividends from the company, which said it was sunk by a model in which individuals who supposedly had signed on to sell the company’s products to others turned out just to want a discount for themselves.
The Punxsutawney Phil Effect. The IPO markets feel a little bit like Groundhog Day (the holiday, not the movie) for buyout sponsors right now. It just seems impossible to predict whether a given portfolio company is going to see its shadow and run back into its burrow or not. Generator company Generac Holdings Inc., backed by CCMP Capital LLC, boosted the size of its IPO, perhaps a good sign, and set a price range. Blackstone Group-owned Graham Packaging Co. also set a price range for its IPO, with current holders planning to sell some of their stake. And snow-plow maker Douglas Dynamics Inc., backed by Aurora Capital Group and Ares Management LP, filed its initial papers for an IPO. Based solely on anecdotal evidence like tromping grumpily through the snow piling up in the sidewalk by the neighborhood police station that hasn’t bothered to shovel here in New York and reading Facebook status updates about 12-inch galoshes not being tall enough to block out the weather in the Midwest, we’re betting this company had a strong fourth quarter, even though it says sales and earnings through the first nine months of 2009 declined.
Snowfall apparently more predictable than health-care reform. But HealthPort Inc., an Abry Partners LLC-backed provider of health-care billing services, pulled its IPO two months after postponing it. And HCA Inc., a company that seems destined for an IPO if ever there was one, said it will pay its private equity backers – Kohlberg Kravis Roberts & Co., Bain Capital Partners and Merrill Lynch Global Private Equity – and others a $1.75 billion dividend, a move that bumps up its debt level and thus could delay any public offering. Its move follows on dividend recaps from a ton of other health-care companies, including fellow hospital operators Vanguard Health Systems Inc. and Iasis Healthcare, as well as pharmaceutical services company Quintiles Transanational Corp., making us think this entire sector is hunkering down to wait out the health-care storm. We know where they can get a good snow plow afterwards.
She’s All That? Allied Capital is like the girl in the teen movie who everyone ignores because she has glasses and her hair is up. But then she takes off her glasses and lets down her hair, and the football captain takes notice even though his best buddy is like “dude, she’s on the math team.” Prospect Capital again increased its stock-swap offer for Allied, which is planning to merge with Ares Capital Corp. “Should the Allied board continue to ‘stiff arm’ us, we are prepared to pursue all available options, including bringing the matter directly to Allied shareholders,” Prospect warns. Meanwhile, fellow BDC Apollo Investment Corp. is one the sidelines for now, saying it’s hard to find the perfect target since “BDCs can be as different as A and Z.”
Conference Klatch. Finally, if you missed our Private Equity Analyst Outlook 2010 conference this week, we posted some coverage on our blog. Notably, Leon Black defended PE in general and Apollo Management in particular, while other industry executives expressed some optimism about exit markets and the opportunity to do larger deals, but expect fund-raising to remain a struggle. And our favorite quote of the conference came from Kim Davis, managing director of mid-market buyout firm Charlesbank Capital Partners, who said mega firms’ intention to do smaller deals doesn’t worry him much, since its mostly younger partners at big firms who wind up on those deals. “It reminds me of that scene where the big dinosaur gives the little dinosaur something, so they can learn how to kill,” Davis said. “The easiest thing to do is win a transaction. The hardest thing is to sell [that transaction] into profitability.”
Have a great weekend, all you big and little dinosaurs out there.
-With Jennifer Rossa
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