What's the future of PE?

http://dealbook.blogs.nytimes.com/2009/07/23/whats-ahead-for-private-equity/

Interesting article a few days ago in the NYT on the future of Private Equity and what some recent studies are predicting. Through the Lauder Institute at Penn, we had the privilege of sitting down and meeting with some pretty important Private Equity fund managers, and all of them seem to be indicating the same strategy and reasoning:

1) Growth of portfolio companies through acquisitions. They're retrenching, and ensuring that the companies that they've already invested in continue to do well...and they're exploring a lot of M&A through their portfolio companies as the could benefit from growing their exisiting businesses and the synergies of merging them.

2) Cautious with new investments...They're still looking at opportunities that exist, but the bar has been set higher for their entry point. The fact that a company is "cheap" or trading at a good multiple is nowhere near being a sufficient justification for them to get involved.

3) Private Equity as a whole will evolve into adding more value to companies. Whereas the current split is probably 90-10 or 85-15 finance oriented versus strategy oriented, many of the managers have argued that is likely to switch. Strategy is increasingly important as they try to build value within their existing portfolio companies…and that isn’t done just by cutting costs, it’s by ensuring that their companies work more efficiently and better than their rivals. Instead of just hiring Bain to do the strategy piece of a transaction, they are looking to bring people on board within the fund itself that can manage that part of the transaction effectively.

This is good news, and will probably help change the way Private Equity is viewed in the world. If these funds start becoming intimately involved in ameliorating companies, (beyond just reducing their costs and increasing their multiples) I think you’ll find more people looking to work with PE funds. The days of easy credit and flipping companies based on financial ratios/leverage/multiples are long gone, and a new era of adding value and helping companies ameliorate themselves strategically has come.

Air Force 'Universal Translator' - FINALLY

Image by billypalooza via Flickr

The Air Force has finally contracted Northrop Grunman to equip a few jets with a "universal translator" system. This system will be designed to allow all personnel from multiple agencies, departmens of the government, and military forces, to seamlessly communicate with one another. An example of when such technology would be used is if a state department convoy carrying only cell phones and satellite phones were to be attacked in Iraq. This system would enable them to seamlessly call in for help, and communicate directly with the A-10 pilots that come in for close air support....

More importantly, I think this is an important and necessary step towards integrating all of the different networks and ways of communicating that exist in "civilian" life as well. One thing that struck me when I was studying to get my private pilot's license was the ammount of material focused on radio communication. Single engine planes carry two radio's at a minimum, both capable of tuning into two different frequencies. Depending on the airport, it may be necessary for the pilot to manage and manipulate 2 or 3 different frequencies at a time. This is an arduous task, considering the number of things that have to be done simultaneously during taxi, takeoff, approach and landing!

Furthermore frequencies are easy to botch as they're printed in size 3 Arial in a light magenta on maps. If you tune into the wrong frequency in the D.C. Airspace, this could spell for disaster, as you may never properly be authorized into the airspace. WE all know what happens then...F-16's and Blackhawks are mobilized to intercept the aircraft. The biggest irony here is that if the aircraft isn't tuned into the right frequency, the jets can't communicate with them in any way!

I'm a big fan of this system and hope that it rapidly gets adapted and put into use back stateside for us civilians!

Image via Wikipedia

Telemedicine - Where Are We?

Got home last night and had an interesting chat on Telemedicine with a good friend of mine who just finished med school. A team of university students in China developed a stethoscope that could record and transmit via SMS all of the information gathered on specific patients. The problem in China is that the doctors in very remote parts of the country aren't as well trained as those in urban area hospitals - the stethoscope would solve this problem by allowing hospitals to review the information give instructions to the doctors on the ground.

This piqued my curiosity, and thus I started doing some research into this - and it turns out that there are over a dozen universities actively researching how to integrate sensors, data gathering points and transmitters in clothing. This would allow for a doctor to perpetually monitor a patient, without either party wasting time travelling.

The opportunities for "outsourcing" doctors and delivering cheap efficient healthcare to everyone are boundless. A subscription service would be ideal I think -individuals who subsribe to the telemedicine service would be provided with a set of "monitoring" clothes that they could put on whenever they felt sick. The clothes would communicate all the necessary data points to doctors either via SMS, bluetooth, or internet to the doctors and nurses on standby. The medical teams would review the information and speak with the client to determine what is wrong and what they suggest. This service could have significant implications for the elderly who may need constant monitoring...


Pedro (the friend who I was chatting with) had an interesting reflection - this service would probably work best in the United States where there is room for private enterprise in Medicine. In Spain, a system such as this one would have more trouble starting up as universal healthcare has created a free dependency on doctors - there's no real need or demand for patients to save money.... also rules and regulations from country to country may also vary drastically....

Ideally, this service would link into google health, and the patient/client could enable certain people to access his/her data points. Family members looking to keep track of somebody would thus be able to do so better from a distance as well...

The one problem I've noted is that although there have been dozens of universities and private enterprises invested in developing wearable monitoring devices since 1995, few have actually launched any type of service of product that I know of. I wonder what's holding them up? I think the platform to interact with clients will be just as important as the wearability of the garments, maybe nobody's created a viable platform yet?

FIRST BLOG

So the pressure's on like donkey kong...On my quest to build an online identity, replete with "witty" tweets, facebook pictures, and a professional network on linkedin, I have decided to start a blog!

philipcortes.blogspot.com will act as a host and sounding board of what I read through google reader, and learn while getting my MBA....some posts may seem random at times, but I'll try to keep them focused on start ups and venture capital.

With that said, I hope you find some of it interesting, and choose to come back!

Philip