Bubble…What Bubble?

by Michael Roth

We seem to be getting to one of those frothy points in the cycle where public markets only seem to know how to go up despite the underlying conditions. Considering the rising valuations and seemingly widely available debt these days, Bison decided to have a look into the “distant past” at buyout funds raised during 2006 and 2007, the last time market conditions felt a little too good to be true.

North America

Looking around the world, North American-focused funds appear to be the strongest performers. The top three performing funds have all generated a net multiple above 2.0x invested capital. The clear standout is Vista Equity Partners Fund III, with a 2.51x multiple and a 30.1% IRR. It’s no wonder they were able to close on $3.5 billion for Vista Equity Partners Fund IV in 2012, exceeding their $2.5 billion target. Looking at the opposite end of the spectrum, Edgestone Capital Equity Fund III seems to be bringing up the rear, according to the CPP IB. This Canadian firm’s 2006 fund is currently valued at 0.87x invested capital.

Europe

European-focused buyout firms appear to be the laggard in terms of performance. Looking at the top three performing funds, their net multiples top out at 1.6x. Astorg IV is at the top of the heap, generating a 1.61x net multiple and a 13% net IRR.  On the other side of the coin, Terra Firma Capital Partners III is winning the race to the bottom with a 0.59x net multiple and a -13.4% net IRR.

Global

In our global category, we mostly have US-based firms whose funds are looking at opportunities around the world. The top performing fund is Apollo Investment Fund VII which has returned a 1.74x net multiple and a 24.7% net IRR. Investors have benefited from their opportunistic investments made during the most turbulent part of the recessionary period. At the bottom of the barrel, JC Flowers II has clearly underperformed with a 0.42x net multiple and a -17.2% net IRR.

Interested in seeing who has the top performing funds for other vintage years? Check out Bison’s Performance Analytics page and start slicing the data for yourself.