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Private equity firms dodge cost-cutting and aim for revenue growth

Private equity is mimicking venture capital, banking on revenue growth instead of cost-cutting.

Why it matters: PE firms may struggle to maintain historical returns, particularly if the bull market slows its rampage and they're stuck with overpriced and overleveraged portfolios.


Driving the news: Bain & Co. this morning released its annual private equity report, highlighting how private equity has been paying dizzying prices:

  • U.S. buyout multiples last year averaged 11.4x EBITDA, a record.
  • A majority of U.S. leveraged buyouts last year were done above 7x debt-to-equity ratios, also a record.
  • Some of this is driven by tech, which keeps seeing its sector-leading deal share increase.
  • Per Bain & Co: "The simple math says that GPs buying companies at these prices will have to generate more value if they are to make good on return expectations — and they will have to do so in a highly volatile and uncertain business environment. A Bain analysis of hundreds of funds in which we co-invest shows that multiple expansion and revenue growth (not margin improvement) are by far the biggest drivers of PE returns."

But, but, but: Private equity would be quick to remind us that a bear market would mean new buying opportunities and that bondholders were mostly happy to amend-and-extend the last time things went bad.

The bottom line: When everything is going up and to the right, a venture-like returns model for private equity can work. But when things slow, PE investors may quickly remember why their VC peers are loathe to leverage portfolio companies.

Church shelters call out U.S. for expelling migrants when they have capacity

Despite the separation between church and state, the federal government depends upon religious shelters to help it cope with migration at the U.S.-Mexico border.

Why it matters: The network supports the U.S. in times of crisis, but now some shelter leaders are complaining about expelling families to Mexico when they have capacity — and feel a higher calling — to accommodate them.

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Derek Chauvin's guilty verdict in the murder of George Floyd is the rare officer conviction

Derek Chauvin, the former Minneapolis police officer who was shown kneeling on George Floyd's neck last year in a video that shook the nation, was found guilty of murder and manslaughter on Tuesday.

Yes, but: Eight years after the launch of the Black Lives Matter movement, it's still rare for police officersto face legal consequences or jail time over the deaths of Black people.

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Senate confirms Lisa Monaco as Justice Department's deputy attorney general

The Senate voted 98-2 on Tuesday to confirm Lisa Monaco as deputy attorney general for the Justice Department, making her the agency's second highest-ranking official.

Why it matters: Monaco is expected to play a key role in Attorney General Merrick Garland's pledge to crack down on violence from domestic extremist groups, including the department's sweeping investigation of the deadly Jan. 6 Capitol riot.

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Minneapolis reflects on Chauvin verdict as a step toward healing and calm

A growing crowd outside the Hennepin County Government Center broke out into cheers, hugs and tears of relief as word of the Derek Chauvin verdict spread just after 4pm CST.

Catch up quick: Eleven months after George Floyd died under the former Minneapolis police officer's knee, a jury of 12 neighbors returned a guilty verdict on all three counts.

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"Painfully earned justice has finally arrived for George Floyd’s family": Nation reacts to Chauvin verdict

America is speaking out after the jury in Derek Chauvin's trial announced its guiltyverdict after about 10 hours of deliberation.

What they're saying...

Ben Crump, Floyd family lawyer: "GUILTY! Painfully earned justice has finally arrived for George Floyd’s family ... Justice for Black America is justice for all of America!"

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Derek Chauvin found guilty of all 3 charges in George Floyd's death

A jury on Tuesday found former Minneapolis police officer Derek Chauvin guilty of second-degree murder, third-degree murder and second-degree manslaughter in George Floyd's death.

Why it matters: This rare conviction of a police officer may come to be seen as a defining moment in America's collective reckoning with issues of race and justice.

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Super League in super trouble

The European Super League is on the brink before it even manages to launch.

The state of play: Two key English teams — Chelsea and Manchester City — are reportedly preparing to exit just two days after the league announced its formation, ESPN notes.

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Johnson & Johnson to resume COVID vaccine rollout in Europe

Johnson & Johnson announced Tuesday it would resume the rollout of its coronavirus vaccine in Europe after the European Medicines Agency (EMA) said unusual blood clots should be listed as a "very rare" side effect of the company's vaccine, but that the benefits of the shot still outweigh the risks.

Why it matters: Johnson & Johnson was set to send 50 million doses of its one-shot coronavirus vaccine to the European Union before it delayed it's European rollout earlier in April "out of an abundance of caution" over rare blood clotting events.

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