Giving Credit Where Credit Is Due

With the Blackstone S-1 coming while I was in Belize, I am looking forward to having a nice S-1 to look at after I catch up with email, etc. While I have been expecting this, others were there before me so time to hand out credits.

1. Eli Aheto was the first person who ever mentioned to me, somewhat off-hand, that the IPOs of the big buyout firms were on their way. I believe this was back in 2003, so that is pretty good foresight!

2. Laurence Lederer gets credit for being the first to point that a political backlash is inevitable. This was a couple of years ago and it looks like this prediction is also going to come true.

Summit Partners using Google Adwords

Makes sense that a firm with a mass outbound calling strategy would be the first (only?) to use (test?) Google Adwords for lead generation / deal sourcing. Here is the landing page that the Google Adwords lead you to.

Conventional wisdom says that this is too high value a service to be advertised for online, but at the lower end of the mid-market, the ads might generate a few leads along the way...

Built-in Upward Bias at Rating Agencies

Moody's, Stupid or Greedy, Flip-Flops on Banks: Mark Gilbert

Someone has gone to the trouble of producing mini-videos mocking the situation and posting them on the Internet. ``I let you out of my sight for 10 seconds and you give out AAA to the Icelanders,'' says a guy in a turban. ``You were just meant to boost fees and get more CDO business.''

There's more than a grain of truth in that little jest about collateralized debt obligations, known as CDOs. On March 13, for example, Moody's shares dropped as much as 6.5 percent on concern the rise in subprime mortgage defaults would crimp the market for new CDOs, hurting fee income for rating companies. Shares of McGraw-Hill Cos., the owner of Standard & Poor's, declined by as much as 2.7 percent.

Pay to Play

The rating companies are scrapping for market share in a business with a built-in bias. Anyone who makes and sells bonds for a living will pay whichever rating company is likely to give their products the highest grade.

So the intellectual honesty of delivering a true assessment of creditworthiness conflicts with the commercial imperative to win business. And whenever one of the rating companies tweaks its methodology, it always seems to result in higher grades, never lower assessments.

Delaware Court Criticizes Buyout

This is an important decision. Courts are usually very deferential to management and board decisions.

In a ruling that could have broader effects on the booming buyout business, a Delaware judge faulted Netsmart Technologies for excluding strategic buyers from its sale process and ordered the company to delay a vote on its proposal to be acquired by two private equity firms. In a memo to clients, law firm Wachtell, Lipton, Rosen & Katz called the decision, issued late Wednesday by Vice Chancellor Leo E. Strine Jr. of Chancery Court, a “major opinion” on a deal that, although small, had many of the same elements as large private-equity transaction.

From Dealbook