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2. Private equity deal flow soars, exits strong

The on-going offensive against SAC Capital and founder Steven Cohen continues to intensify. While the industry was riveted by the saga of former SAC Capital analyst Mathew Martoma--he has pleaded not guilty to insider trading charges and refuses to turn states evidence--there was apparently a lot of work going on to develop other cases.

The Financial Times has reported that the investigation by the FBI and the U.S. attorney's office in Manhattan "has widened to include at least four and as many as six more stocks."

The most intriguing development, however, concerns former SAC Capital executive and Cohen confidant Michael Steinberg. He was put on leave in September, after one of his employees was implicated in an insider trading scandal. The employee has been cooperating with investigators, and a decision on whether to indict Steinberg is expected soon, according to the paper. That sets up an intriguing possibility.

So far, no former employee of the controversial hedge fund has agreed to cooperate against Cohen himself. But Steinberg would be in position to know more than anyone at the firm, except Cohen himself. Is it all possible that he would turn on his former employer? That just might be the breakthrough that prosecutors are looking. They are no doubt hungry for this to happen.

An indictment, however, just might signal that negotiations have broken down and that Steinberg won't cooperate.

For more:
- here's the article

Read more about: insider trading, SAC Capital
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By Jim Kim

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3. Handicapping the chances of sweeter Dell deal

Just how healthy is the private equity industry right now?

In the post financial crisis ennui, that question has been hotly debated. Most people see to agree that the Golden Era has ended with a whimper and that the returns going forward will lag significantly. That said, there was plenty of good news in 2012.

Preqin has released research showing that North American deal flow reached "a post-Lehman high in 2012." Globally, 2,866 buyout deals were announced, valued at $254.6 billion. "This nears the global post-2008 highs of 2011, which witnessed $264.8bn globally from 2,900 buyout deals; compared to 2010, global deal flow in 2012 represents a 14% increase in the number and a 15% rise in the value of buyout deals," Pregin notes.

When it comes to actual exits, which have been relatively hard to achieve in the years following the financial crisis, there was also plenty of good news domestically. In North America, exits surged to post-Lehman high in 2012, as $147.1 worth of exits occurred during the year.

These are certainly welcome trends. And the proposed Dell deal may be putting some shine back on LBOs, which still account for 43 percent of all deals. You would have to say that these trends bode well for 2013, especially if the markets hold up.

Still, the industry faces some massive issues, especially in the area of fundraising. Going forward, the industry will no doubt continue to diversify, as the share of revenue accounted for by traditional private equity will continue to dwindle. But that will take place over the long-term. There will be a lot of good years as we travel that long and twisting road.

For more:
- here's the article

Read more about: Private Equity, lbo
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By Jim Kim

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4. SAC Capital opens main fund

Will Michael Dell and Silver Lake be forced to sweeten their offer to take the firm private?

A big debate has broken out, as more shareholders ponder what to do and as the industry waits for proxy advisory firms to make their determinations. The go-shop period is also in effect.

Bernstein Research analyst Toni Sacconaghi has downgraded the stock to neutral arguing that the LBO will likely be consummated. "We believe a deal is likely to be closed at or modestly above the current offer of $13.65," he wrote to clients, as noted by MarketWatch.

He also wrote that "a small risk exists that shareholders will not approve the deal, which would likely create material near-term downside for the stock, but overall, we see the risk-reward for the stock as being largely in balance."

But is the risk really that small?

As of now, we've noted that risk arbitrageurs hold about 20 percent of the stock. That figure may have risen by now. It's unclear if the group as a whole has fixed upon any single outcome. The stock has been hovering just above the offer price of $13.65 a share. If it zooms forward, it will be a clear signal that the market wants a bigger premium, a concern that Dell and Silver Lake would have to address.

Two of the company's biggest outside shareholders, Southeastern Asset Management and T. Rowe Price, have come out against the transaction, and we may see more critics merge soon. It might not take that much to create a groundswell. If one of the main proxy advisory services recommend against the deal, things will get interesting fast.

All that said, you would still have to believe that the chances of the deal as proposed will go through are higher.

For more:
- here's the item
- here's a Business Insider article

Read more about: lbo, Dell
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By Jim Kim

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5. Legg Mason's future on the line

As the investigation into SAC Capital and founder Steven Cohen intensifies, limited partners of the fund face a huge decision.

The first redemption request deadline of the year was February 14. It will be interesting to see how many decided that they need to start redeeming funds given that SAC Capital has generated so much controversy, despite the stellar returns. They are allowed to redeem 25 percent of their holdings at a time. The fund has been working hard to retain clients and employees alike. While some investors have defected, it appears that the fund has retained enough for the moment to stay viable, unlike other funds that were targeted by insider trading investigations.

Still, SAC Capital has made an intriguing move in reopening its main hedge fund. According to Bloomberg, the fund has been "soft closed" for years, meaning that it only accepted new funds from select investors, mainly as a way to accommodate preferred clients. The fund most likely does not want to make a big deal out of this, as it might appear as though it is desperately seeking investors. That's not the case, not yet anyone.

But it would be very interesting to see what kind of terms the fund is offering. The marketing folks might be pitching this to fresh investors as a once-in-a-lifetime opportunity to get into an acclaimed fund on terrific terms.

For more:
- here's the article

Read more about: insider trading, SAC Capital
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By Jim Kim

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