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10/11/2013
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Vol. 34, No. 41
$2.00/OCTOBER 14 - 20, 2013
Entire contents © 2013 by Crain Communications Inc.
Zombies could be a dying breed
RICH WILLIAMS
Struggles of private equity funds to raise capital can be frustrating to investors and leave some as ‘walking dead’ By MICHELLE PARK LAZETTE mpark@crain.com
Lifeless zombies are multiplying in the world of finance and are a growing concern for investors, albeit a far different one than the flesh-eating creatures who imperil the lives of humans on AMC’s “The Walking Dead.”
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typically until the assets of the private equity funds are sold. The situation means capital that could be returned and reinvested in other ways that arguably are more beneficial to society is held captive. It also can make for unhappy limited partners, or LPs, as the investors are known. See ZOMBIES Page 35
4.01
4.36
4.06
3.84
’04 ’06 ’05 ■ Source: PitchBook
2003
3.61
3.93
4.02
’07
’08
’09
Industry maintains healthy outlook, but cutbacks are on the rise By TIMOTHY MAGAW tmagaw@crain.com
Northeast Ohio has been fueled for years by the economic firepower of the health care business, but a recent surge of layoffs and staff reductions at area hospitals indicate the institutions might not be the
hiring machines they once were. In order to cut $330 million from its budget for next year, the Cleveland Clinic, one of the largest institutions in the country, announced last month it was offering early retirement packages to 3,000 employees and that layoffs likely were on the horizon. Summa Health System
4.79
4.98
’10
’11
5.36
’12
and Akron General Health System also reduced their staffs within the last month. And with a wave of hospital mergers on the horizon, health experts expect further cutbacks as health systems look to consolidate costly back-end operations. The reasons for the purge are many: Health care reform has blan-
keted the industry with uncertainty, hospital inpatient volumes are headed south, and government and commercial reimbursements often aren’t covering the cost of care. At the same time, the nation is grappling with how to transition to a health care system that pays providers for keeping people healthy, rather than on a fee-forservice basis when people are sick. See HOSPITALS Page 36
Compliance Trip Wires
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A look at the median number of years it takes private equity funds to exit, or sell, a portfolio company:
Hospitals are becoming leaner operations
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■ Cleveland will have plenty of reasons for a toast at BeerWeek. One is the region’s status as a craft-brewing powerhouse. PAGE 3 ■ Crain’s salutes the CFOs of the Year. PAGE C-1
These zombies are private equity’s undead: funds that are “alive” in that they still own companies, but “dead” in that they’ve exhausted most, if not all, of their capital and can’t raise new money, often because of lackluster returns to their investors. All the while, investors’ money remains tied up in these zombies,
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