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A man walks past the New York Stock Exchange on the corner of Wall and Broad streets in New York City, New York, U.S., March 13, 2020. REUTERS/Lucas Jackson
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Whatâs a fair price when you are selling something to yourself? On Wall Street, thatâs not a trick question.
A growing number of private equity firms are establishing new funds to buy portfolio companies from funds they already control. With the buyer and seller each an entity controlled by the same private equity firm, scrutiny is growing over how they price such deals. Transactions must be done at fair value and this must be sufficiently mitigated to make sure everybody feels good about the deal being done, said Brian Rodde, managing partner at Makena Capital, a private equity investor.
Analysis: DIY deals- How private equity firms buy assets from themselves
By Chibuike Oguh
Reuters
(Reuters) - What s a fair price when you are selling something to yourself? On Wall Street, that s not a trick question.
A growing number of private equity firms are establishing new funds to buy portfolio companies from funds they already control. With the buyer and seller each an entity controlled by the same private equity firm, scrutiny is growing over how they price such deals. Transactions must be done at fair value and this must be sufficiently mitigated to make sure everybody feels good about the deal being done, said Brian Rodde, managing partner at Makena Capital, a private equity investor.