As the credit debacle and volatile market lag on, those in the buyout industry have been forced to find new ways to manage this economic state and continue to close deals. 

I’ve been lucky enough to learn how it can be done from my client, Carl Thoma, a Chicago-based PE vet leading Thoma Bravo LLC.   Now about 1,000 investors, fund managers and players in the world of private equity attending the Private Equity Analyst Conference later this month will have the chance to hear Carl, along with a panel of leaders in private equity, discuss how PE has had to adjust in order to get deals done, and what they predict is in store for the industry over the coming years.

Put on by Dow Jones, this year’s conference on September 16-17 in New York City appropriately carries the theme of “PE at the Crossroads”.   For more details on the conference visit: http://peaconference.dowjones.com/

Having focused my career in public relations, perception is a significant part of what I do professionally. How are my clients perceived by their audiences and how can I help shape that audiences’ perception of my client?

In a nutshell, you can have a solid company and make a great product with true benefits to the customer, but if your target audience doesn’t perceive your product the right way, you won’t sell it. That’s where PR can have quite an impact on perception, which directly impacts a company’s bottom line.

Last week I listened to Howard Marks of Oaktree Capital speak about the economy – a talk he called “this mess… and getting out” - at a gathering in New York. And what I took from his comments was that the economic recovery will also largely be about perception.

Marks, who is well-known for his musings via “memos” to clients, feels we should be confident that the cycle will invariably turn and the root of the recovery might by any of the items listed below. Note the majority of those items are perception-based:
• Appearance of bargains (perception)
• Emergence of optimism (perception)
• Some nugget of good news (perception)
• Inadequate return on cash (somewhat perception)
• Capital in the hands of possible buyers

Thus, economic recovery may be catalyzed by perception. And, in close, one of my favorite lines from the talk: “sooner or later the fear of losing comes to be balanced by the fear of missing out.”

As a sidenote, amidst all this talk about “perception” something a bit more tangible related to economic recovery has been released.  LIBOR dropped the most it has in 2 months, and while still historically high, in simple terms: banks/financial institutions are more confident and thus more likely to lend.  Check out the Bloomberg report:
http://www.bloomberg.com/apps/news?pid=20601102&sid=aS_wbJukwWI4&refer=uk

I attended an FWA event recently where the panel discussion was on corporate social responsibility and microfinance. What was interesting was that the all-female panel represented Citi, Morgan Stanley, Merrill Lynch and AMEX.  Financial companies we hear a lot about these days for reasons other than their philanthropic efforts. A couple of points particularly caught me:

• CSR can be a grassroots reputation management tool:  According to some of these panelists, the relationships their companies have built with communities thru CSR have provided them with credible third party validation in not-so-good times. In other words, while everyone is bashing Citi, the bank has real relationships and proponents around the globe — those less fortunate individuals whom they have empowered economically.  This has helped their reputation during a time of corporate turmoil.

• CSR isn’t being cut:  In a time when cutbacks are very popular – be it employee programs and benefits, employees themselves, consultants and other “extras” - CSR programs aren’t taking a hit, at least at these big financial entities, because their value is seen all the way at the top. CSR has become a “strategic asset”.

During a media interview today, an experienced private equity firm partner made a prediction about when we’ll see deals begin to happen again. In a nutshell, the current market has public valuations down approximately 50% and sellers won’t sell for today’s market prices. So M&A isn’t happening. But this investor believes that the more companies trade at these levels, the more sellers will realize it’s necessary to sell at this level. He based his prediction on his experience doing deals in the software industry during the tech bubble in early 2000 which resulted in a “dramatic reset”…
• Software industry had a reset in 2000-2002, similar to the reset we’ve seen;
• After the March 2000 market crash very few deals took place for nearly two years;
• Not until the latter half of 2002 did the deal stream really begin to pick up and then it grew from 2003 - 2007. 

So according to this, if Q4 2007 was our breaking point to start this “reset”, deals should begin to pick up again in 2010.

People are cutting back financially wherever they can. It’s gotten so bad according to a survey released this week that people may even revise their cell phone plans and cut out mobile internet access.

Survey finds:
• About 19 million Americans, or one in five cell phone users with extras, have considered cutting back on extras or have already, while 41% of cell phone users said it is very likely or somewhat likely that they will cut down on extras if the economy worsens.

And it’s not just all talk…
• 8,740,000 Americans — that is 19% of consumers with a cell phone — report that they already have ‘discontinued cell phone service in the last six months because of actual job loss, fear of job loss, the recession, or any other related financial concerns.’

Check out more details of the survey results:
http://www.consumeraffairs.com/news04/2009/03/recession_cellphones.html

I had the pleasure of sitting in on a middle market private equity company’s annual meeting recently in Chicago. It’s always interesting to get different perspectives and predictions on the state of the economy and the timeframe of its recovery… as well as how that recovery will actually happen.

A private equity investor with a 30+ year tenure in the industry finds the following:

• PATIENCE: We must be patient – this is a process, not an event.

• LOW GROWTH: for the next three to five years we will be in an “L” recovery (versus U or V) and experience low growth.

• SAVINGS: We must change the way we look at our assets and how we both spend and invest our money.  For Americans, homes were once our primary asset, but now we need to become savings driven, not real estate driven.

• THINK LOCAL: Recovery will begin at the local level with small business and grow outward from there. Innovation is key to helping move this recovery along.

It’s tough to be optimistic about the economy today.  The market remains volatile on a daily basis, the unemployment rate is the highest it has been in 25+ years, G.E. is in trouble (read the NY Times article from this past Sunday), I could go on and on.

However, Justin Fox from TIME magazine had some thoughts this morning about why he is optimistic right now.  While he’s not particularly convincing, and even a little wishy washy on some of his points, if you’re looking for some hope consider his 3 reasons why you should be optimistic about the economy:

1. Stock market not overpriced (Fox says don’t just look at one year of earnings.)
2. Government involvement in fixing the economy (While many would say yikes to this, Fox claims we should be thankful that the government is being proactive, realistic and moving us forward.)
3. Consumer savings rate up (This is good in the long term and even in the short term because it helps us get to the bottom quicker so we can move into recovery.)

Here’s the full CNBC segment with Justin Fox: http://www.cnbc.com/id/15840232?video=1057945685&play=1