MSNBC – Though venture capitalists resumed sitting on their hands, a flood of private-equity capital, along with one large transaction, meant Metroplex firms raised the most money in the firstquarter since the fourth quarter of 2001.
Local firms received a total of $274.6 million between Jan. 1 and March 31. That’s up from $184.8 million in the fourth quarter of 2005, which heretofore had been the high-water mark since the last quarter of 2001. In the first quarter of 2005, the total was $118.4 million.
The latest quarter’s results were pumped up by the $148 million that Dallas-based ASAlliances Biofuels received from several investment concerns to finance the construction of three Midwestern ethanol plants.
Without that deal, local fund raising totaled $130.9 million. Venture capital accounted for just $88 million of that, down from $150.2 million in the fourth quarter of 2005. Wealthy individuals and private-equity firms made up the rest.
Dan Patterson, president of the Dallas-based buyout shop Transition Capital Partners, says large institutional investors like pension funds are allocating a greater percentage of their portfolios to private equity, which means more competition among players in the field. That in turn is driving up the prices companies are fetching, says Patterson, whose firm does leveraged buyouts and recapitalizations.
For entrepreneurs, that means potentially greater prices for their businesses, and on better terms than they might have gotten before so much private-equity capital came into the market.
In addition, both private-equity shops and venture capitalists are seeing new competition from an unexpected source: hedge funds.
