Wednesday, January 05, 2011

Private Equity Firms at Odds Over Investments’ Value -

"Something is worth what others will pay for it" is a cliche that has been around forever. But what if the asset is not for sale? Then all of the valuation models in the world are just good guesses and reasonable people may disagree. That is what is happening now in firms that went private:
From Private Equity Firms at Odds Over Investments’ Value -
"After so many public companies passed into private hands during the boom years, buyout specialists who defined that era of Wall Street wealth are seemingly at odds over how their investments are — or are not — panning out.

Freescale Semiconductor, for instance, was taken over by a pack of private investment companies in 2006 for $17.6 billion, of which $7 billion came from the firms. That $7 billion is now said to be worth $3.15 billion. Or $2.45 billion. Or $1.75 billion. The owners — the Blackstone Group, the Carlyle Group, Permira Advisers and TPG Capital — disagree on its value.
Clearly this is a problem for many interested parties. From investors to pension plans and creditors. Making matters worse, there is no real solution.

"Accounting rules give the deal makers a lot of wiggle room, because even experts often disagree on how to value investments. At the big firms, at least, independent auditors examine the figures and how they were reached.

But analysts agree that valuations on the books of private equity firms can be skewed by the firms’ motivation to place high values on their investments."

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