Kirk Radke on the globalisation of private equity. He spoke to Eleni Chalkidou
International law firm Kirkland & Ellis has a 100-year history of offering outstanding legal services to its clientele globally. The firm is widely celebrated for providing high quality counsel in areas such as IP, litigation, tax, restructuring and complex corporate matters. It offers an ability to draw upon its awareness within finance, real estate, antitrust and competition, environmental, labour and ERISA law to assist clients.
The firm, which comprises 667 partners and 717 other lawyers, has a particular specialism, which distinguishes it from the competition: private equity. Kirkland & Ellis advises clients proactively rather than simply reacting to situations retrospectively.
The firm has been continuously recognised as the leading force nationally for private equity buyouts, and it continues to work to stay ahead of the competition. To help achieve this the firm utilises the expertise of its highly trained staff, including Jeffrey Hammes, Kirk Radke and Douglas Gessner. The team works closely together, utilising all its resources to assist clients’ best interests. The association between the various offices has allowed the firm to conduct deals for clients around the world, including in Europe and Asia.
Radke, who is a New York-based lawyer with the firm and has more than 25 years experience in complex corporate and private equity transactions, is quite clear about what it takes to stay at the top.
“Kirkland has been extremely involved within private equity for a long time and what is exciting is that our experience has shown us that over the next few years we will see even more global transactions. That is where resources from our different offices will become essential. Luckily, we have the ability to make use of these resources effectively.”
Speaking of the diverse areas the firm has advised on from its international offices, he says: “It gives us a certain view and understanding of the market in all its forms, including small and big deals, and fund raising. Our long history in this field representing every type and size of company permits us to deliver views on the issues that are emerging.”
He adds: “Also, we are proactive rather than reactive and stay abreast of all the issues by recognising how different risks are being viewed by the market. It is because of the longevity of our experience and advice provided that we are very comfortable with the process. It is clear to us that our clients will demand only the highest level of legal representation.”
Considering his experience in advising clients, he says: “Repeat business from our clients reinforces our belief that if we give our best, they will continue to push us to get better each time through additional work. That way our involvement becomes continuous and our knowledge remains always up-to-date.”
Kirkland has one of the most active and recognised private equity practices as it represents clients in several diverse industries, advising buyers and sellers of both private and public companies and multiple private equity investors in “club” transactions. Kirkland’s heavyweight private equity practice is noted in the United States, Germany, the United Kingdom, Hong Kong, and China, as it continually covers a broad array of aspects within a rapidly changing field. It is often recognised for its counsel to midmarket funds and mezzanine lenders but the firm provides service on a broad array of matters in the area.
The firm’s innovative strategy can be particularly observed in the structuring of acquisitions and the financing of private and public companies, as well as its expertise in stock-for-stock acquisitions, spin-off transactions, and acquisitions of minority interests. Kirkland’s widespread resources and strength in traditional legal fields such as bankruptcy, tax and corporate law, make it easily a top pick for numerous industry leaders as it benefits its private equity clients.
Over the past few months the team has represented several big names in this field, including Brazilian equity fund 3G in its $4.4bn acquisition of Burger King, and Bain Capital in its purchase of Dow Chemical’s Styron Division for $1.6bn. Most recently the firm advised Apax Partners in a joint transaction which was valued in the region of $2bn. Apax Partners entered into an agreement to acquire Epicor Software, a provider of enterprise application software solutions and services, and technology provider of business management software solutions for mid-market retail and wholesale distribution businesses, Activant Solutions. The intention of Kirkland’s client was to combine Activant and Epicor in order to create, Epicor Software Corporation, one of the largest global providers of enterprise applications focused on the manufacturing, distribution, services and retail sectors.
Kirkland & Ellis has continued to expand its international reach as the private equity market continues to evolve globally. Many agree that economic growth in emerging markets is being driven especially by the BRIC economies. Although especially prevalent in Asia and Latin America, it appears that there are increasing opportunities in the Middle East, which progressively more private equity houses are actively considering.
Radke concurs with the visible signs of a global private equity spread. He personally handles high-stakes transactions, fund formations and spinouts of institutional private equity units on behalf of industry giants such as Apax Partners, Avista, Bain Capital, Madison Dearborn Partners and Warburg Pincus.
Commenting on the global reach of private equity, Radke says: “We should take a step back to better comprehend the development. The private equity industry from 2008 to 2010 demonstrated to investors and constituencies the value that good private equity houses can bring to the industry. The alignment created better corporate governance and permitted solutions to business issues. The private equity model of corporate governance permits good private equity houses to see support across the globe, not just within Europe and the Unites States, but to any region and any country.”
According to Radke this shows the advance of private equity over the last five years as it opened up many more markets in the Middle East and South America. “They are all experiencing very positive prospects and opportunities for growth. It is natural that private equity is a participant because private equity is a global business and not restricted to any particular region or country.” He adds: “At the moment a lot of smart people look at opportunities in Asia, Brazil and the Middle East, as conversation emerges to a greater extent about those regions for the industry.”
He adds: “All of the market participants have noticed this emergence. This includes advisers in governments who understand the need for economic growth for their countries and look to private equity to help them as it plays a crucial role in the growth going forward.”
He adds: “Private equity is no longer something people don’t understand. Ten years ago not many did but now there is more awareness. It is still not where it needs to be as the general understanding lags behind a little. Even if some very smart and well schooled market participants completely understand private equity, misconceptions still exist about it. Thankfully however, this is changing.”
In Radke’s opinion there are no specific regions that will emerge next for private equity.
“It is my view that there are opportunities in all of the different markets. Roughly a year ago there was more visibility in Asia and less in Europe. However, without turning completely away from Asia, we now see more around Eastern and central Europe as well as the developing countries. There is not one region outperforming in their investment activities, and it is fair to say we observe activity across many.”
As with every industry, there are currently significant tests facing financial markets and the crisis has shown that this is specifically due to the lack of capital and liquidity, and particularly problems of interconnectedness. Commenting on the need for global coordination and controlled financial market regulation, Radke says: “Private equity houses were not a cause of issues currently being associated with the financial crisis, nor the European debt crisis. However, I feel that there needs to be a continued effort to push forward discussions with regulatory agencies and rule makers in various jurisdictions so they can get a clearer understanding of what private equity does and how the corporate governance market adds value. In addition, an education process would be a good option so the industry can get its point across. There is a certain level of supervision that is required to promote an open understanding.”
Radke is also passionate on the topic of regulatory dialogue, and emphasises its importance, saying: “Key market participants should consider engaging in dialogue so that they can make decisions based upon what the wider understanding of the industry actually represents.”
Meanwhile, a few believe that lenders appear to be increasingly limiting the rights of targets in private equity leveraged buyout financings. When asked if he believes the relationship between lenders and targets is toughening in the US private equity market, Radke says: “What we are seeing over the last year in the US is a lot of refinancing of existing debts and an increase of capital markets activity with a new process of how credits are being written. Additionally, we are observing very healthy and balanced discussions where sponsors push for covenant packages more like those in 2007.”