Erin Griffith

Writing for Fortune magazine, author William D. Cohan today painted a bleak picture of former Quadrangle head Steve Rattner’s current situation. According to the story, Rattner has potential conflicts as Obama’s “car czar,” and he left Quadrangle “in a pickle.” The story lays out specifically which concessions the firm is making for its key man vote. Remember, as recently as Monday, we were hearing LPs would let the Friday deadline pass. Meaning, investors had until this Friday (tomorrow) to vote to kill the fund, and they’d likely take concessions on things like fees and carried interest in exchange for not voting. But that was before the State of New York launched its investigation as to whether Quadrangle “intentionally misled” the firm regarding its use of multiple placement agents. With $125 million sunk into the fund, New York is one of Quadrangle’s largest LPs, and knowing that New York is unhappy could change things for the other LPs. Who’s to say they weren’t misled also? It’s clearly a situation in flux, and one we’re anxious to learn more on. For now, we’ll have to get by on the details revealed in Cohan’s story, which show just how much Quadrangle had to sweeten the deal to keep investors from killing the fund.

TPG has taken the prize (if it is a prize) of largest private equity firm in the world, as ranked in Private Equity International's Top 300 list of firms. Carlyle Group, last year's winner, dropped to number three. GS Capital, Goldman Sachs' arm, came in second and KKR ranked fourth. The results were calculated based on capital raised for direct investments in the past five years. Two thirds of the top fifty firms were based in the U.S. TPG won out with $53.6 billion. It's ironic that a ranking of this kind would name TPG as number one of anything, given the firm recently earned itself a few other top spots for crappy performance. For our part, peHUB called the firm's investment in Washington Mutual the worst deal of 2008. Time magazine ranked that deal the 2008's eighth worst of the year and listed its buyout of Harrah's, alongside Apollo Management, as the third worst.

The New York’s pension fund kickback scandal has reached all the way to California. Pro Publica is reporting that Hank Morris’s firm, Searle & Co., shared fees with California investment firm Wetherly Capital Group on commitments from CalPERS, CalSTERS and LA Fire & Police. Writes ProPublica: Wetherly received up to $3 million in fees for one pension deal in New York, investigators say. … Wetherly and the firm with which Morris was affiliated, Searle & Co., also have shared fees for helping a private equity firm seal three multimillion dollar deals with California funds, ProPublica has learned. Overall, Wetherly has helped ten firms score a collective $300 million in commitments from CalPERS. Meanwhile, CalPERS apparently didn’t know there was a relationship between Wetherly and Morris, the publication notes.

Back in those glorious boom times, buyout firms purchased multi-billion dollar companies on the premise that, after they somehow improve the business, they'd do a big, exciting IPO. That dream is clearly dead for the moment, and gone with it are LP hopes of distributions. If deal flow begins to pick up and buyout shops begin to spend all that "cash" they're sitting on, LPs could be in trouble. I put quotes around "cash" because it isn't exactly in their pockets. It's a commitment, and with very few exits, the money is flowing one way, making it a commitment LPs aren't too excited to fulfill. The last real mega-buyout exit was the $16 billion sale of Intelsat by Apax Partners, Apollo, Madison Dearborn and Permira. That was 14 months ago. Since then, most of the mega-firms have piddled around, selling little things with no disclosed deal value here and there. Meanwhile, four of the firms have experienced an all-out drought for the past year and a quarter. Below, I've taken a closer look at the date of the most recent exits by members of the Private Equity Council, a private equity advocacy organization with the 13 largest buyout firms as its members. They're listed in order of date.

EuroFresh: The rotten tomato company went bankrupt finally last week, and Dealzone has an interesting take on the company's downfall: Did the crackdown in illegal workers cost Apollo $76.5 million? (Dealzone) Obviously the News Of The Day for Private Equity: The Journal's take on the placement agent ban. (WSJ) Just In Case They Make A Madoff Movie: The Daily Beast has laid out a potential cast. (Daily Beast) Not Just Pre-MBA Associates Going Back to School: It's also Wall Street's leaders, going back to teach. Despite the "hard work for little pay," Cityfile calls getting summers off a tie.

Hope this isn’t a sign of things to come. With depressingly perfect timing, news of the State of New York’s “ban” on placement agents broke just after we read that two placement agencies would close their doors. This morning’s issue of Private Equity Insider states the placement agent businesses of both William Blair and Citigroup have shuttered their fundraising practices. The publication reported that former William Blair placement agents plan to continue to work together, possibly through creating a new fund marketing firm. Emails to professionals within William Blair’s practice were bounced back. UPDATE: A William Blair representative confirmed the business was closed.

Today New York State Comptroller DiNapoli announced a ban on the involvement of placement agents in any investment by the New York State Common Retirement Fund. That's on the heels of Carlyle Group, and possibly other firms, completely dropping its use of the service. Clearly, these actions make life more difficult for the numerous professionals who make a living placing funds. To get a placement agent's perspective, I spoke with Russell P. Pennoyer, president of Benedetto, Gartland & Company. His firm, based in New York, is one of the earliest placement boutiques, founded in 1988. He discussed what value placement agents bring to funds in the market, and what should be done to make the process less prone to corruption. Is the placement agent business really just a matter of selling connections? What value do you bring to clients? The vast majority of people in this business are like any other investment banker helping a client access the capital markets. The GPs, who are extremely skilled in the types of investing they do, don't really know how to do all of the work that goes into raising a fund. They don't necessarily know how to describe what they do. They don't necessarily know what an investor needs to see to make an informed decision, or what kind of background information they want.

Monday, Monday: Merger Mondays are back! Maybe! Yesterday was arguably the best day for M&A this year. (Dealzone) Google Me: Thanks to Google profiles, you can now have more control over what comes up when someone Googles you. Good news for job hunters. (Mashable) New Fund On The Block: August Capital is backing StumbleUpon's founders in their deal to buy back the company from eBay with its new "balanced-stage" fund. (Dealscape) Don't Blame Leverage: More regulators would have made the financial crisis worse. (Clusterstock)

Further proof that finance and rock music shouldn't mix: Pink Floyd is suing music label EMI and Terra Firma, its private equity backer. Terra Firma's ownership has been blamed for the departure of such acts of Radiohead and Paul McCartney from EMI's stable of artists. Now Pink Floyd, its second-best-selling artist (topped only by the Beatles), claims EMI miscalculated its royalty payments. EMI has certainly proven to be a nightmare for Terra Firma and perhaps the biggest misstep of its former leader Guy Hands' career. (Remember the attempted Music-Backed Securities?) He stepped down as CEO after the company was written down by half, causing the firm to take a €1.39bn loss in 2008. The move was regarded as largely symbolic

The distressed mortgage fund managed by Pacific Investment Management Co. (Pimco) hasn't shown any signs of improvement in Q1. In fact, it declined ever-so-slightly again, according to confidential fund documents obtained by peHUB. Last month we reported that the fund had earned a return of -34.5 since its inception in October 2007. That included a 25% drop in the fourth quarter. Well, in the first quarter it fell another 12.7%, dropping the total loss to -35.5 percent. The total capital contributions to the fund's offshore feeder is $1.58 billion (the total fund is $2.866 billion). The NAV of those assets is $849 million. The firm's explanation isn't too different from its last one: