News
Keystone Reports Solid Performance from Small Buyout Funds' Portfolio Companies
4/20/2009
Since the fund’s inception in 2006, Keystone Private Equity, L.P. (“Fund I”) has made commitments to nine underlying small buyout funds. Those underlying funds have made 37 buyout investments, which have a combined gross portfolio valuation of 106.6% of cost as of December 31, 2008.
“Our small buyout funds have done exceptionally well given the current recession and market conditions. This performance further demonstrates the low correlation between small buyout funds and public markets. It also underscores the fundamental differences between small buyout and large buyout funds, as the portfolios of most large buyout funds lost considerable value in 2008,” stated Brandon Nielson, Managing Partner at Keystone.
The average entry price of the 37 buyout investments made by Keystone’s underlying fund managers between 2006-2008 was 5.7x EBITDA, whereas the average entry multiple of all buyouts closed during this time was 9.0x EBITDA per Standard and Poor’s. Small buyout funds make money by buying at low valuations, making operational improvements and other changes to increase earnings, and then selling at a premium to a strategic buyer or larger private equity fund, as opposed to the large buyout model in recent years of buying high and relying on financial leverage to generate returns.
Keystone was founded with an emphasis on small buyout funds and small buyout continues to be a core area of focus.