Andrew J Bowden Director of SEC's Office of Compliance Inspections and Examination
"The New York Times New Editor Buries Important Story on Private Equity Fee Shenanigans on Holiday Weekend." May 28 2014
(Here is the excerpt from that article related to the Biomet sale.)
Morgenson identifies an even more dubious fee practice early in her article, that of managing to get paid for services never performed. She discusses the sale of Biomet, a Warsaw, Indiana- based company sold by a Blackstone-led consortium for $13.4 billion, which included a $2 billion profit. But the carried interest and the transaction fees weren't all the general partners got out of this deal:
But for Blackstone and the other private-equity partnerships in the deal — overseen by Goldman Sachs, Kohlberg Kravis Roberts and TPG Capital — this deal will be a gift that keeps giving. That's because, beyond the profits they share with their clients, they will be paid millions more in fees — for work that they are never going to do.
In addition to a 20 percent share of gains from the sale, as well as management fees of 1.5 percent to 2 percent charged to investors, the private equity firms will also share in an estimated $30 million in "monitoring fees." These fees were to be charged through 2017, but given that the deal is expected to close early next year, Blackstone, Goldman Sachs, K.K.R. and TPG will be paid for two years of services that Biomet isn't receiving.
"The New York Times New Editor Buries Important Story on Private Equity Fee Shenanigans on Holiday Weekend." May 28 2014
(Here is the excerpt from that article related to the Biomet sale.)
Morgenson identifies an even more dubious fee practice early in her article, that of managing to get paid for services never performed. She discusses the sale of Biomet, a Warsaw, Indiana- based company sold by a Blackstone-led consortium for $13.4 billion, which included a $2 billion profit. But the carried interest and the transaction fees weren't all the general partners got out of this deal:
But for Blackstone and the other private-equity partnerships in the deal — overseen by Goldman Sachs, Kohlberg Kravis Roberts and TPG Capital — this deal will be a gift that keeps giving. That's because, beyond the profits they share with their clients, they will be paid millions more in fees — for work that they are never going to do.
In addition to a 20 percent share of gains from the sale, as well as management fees of 1.5 percent to 2 percent charged to investors, the private equity firms will also share in an estimated $30 million in "monitoring fees." These fees were to be charged through 2017, but given that the deal is expected to close early next year, Blackstone, Goldman Sachs, K.K.R. and TPG will be paid for two years of services that Biomet isn't receiving.