The Private Equity Fee Stream Dries Up
http://blogs.wsj.com/deals/2008/03/31/
the-private-equity-fee-stream-dries-up/?mod=WSJBlog
March 31, 2008, 10:01 am
The Private Equity Fee Stream Dries Up
Posted by Deal Journal
Fees paid by two of the world’s biggest private-equity firms to investment banks have fallen to almost zero amid the collapse in their deal-making activity since the credit crisis began in June.
Blackstone Group and Goldman Sachs Capital Partners, usually lucrative sources of fees for investment bankers, paid less than $5 million for advice and financing in the first quarter of this quarter, according to data provider Dealogic.
That compares with the first three months of last year, when Goldman Sachs Capital Partners paid out $208 million and Blackstone spent $198 million, making them the second and third-biggest fee payers to investment banks world-wide after Texas Pacific Group, now TPG.
In the first quarter, Goldman didn’t feature in the top 100; Blackstone was ranked 67th. Dealogic didn’t specify how much each firm paid out.
The data are another sign that private equity deal making has been one of the biggest casualties of the credit crisis and has hit revenue at investment banks. Total fees paid by private-equity firms globally fell 79% to $1 billion in the first quarter, led by Apollo Management, which paid out $74 million.
Private-equity firms were one of the biggest and fastest-growing sources of revenue for investment banks until the start of the credit crisis in June. Instead of chasing private-equity business, banks now are reducing their exposure to the sector by selling leveraged loans or redeploying staff into other areas.
Fees earned by banks from private-equity firms accounted for 9.1% of global investment banking revenue in the first quarter, compared with 22% a year earlier.
–David Rothnie is investment banking editor in London for Financial News, a Dow Jones publication and a contributor to Deal Journal.
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