Post by unlawflcombatnt on Sept 14, 2007 3:28:04 GMT -6
from Reuters:
Private equity firms losing LBO exit strategy
9/12/07
By Michael Flaherty and Megan Davies
"Private equity firms are seeing the doors shut on a popular exit strategy.
The number of deals in which private equity firms sold their companies to fellow buyout shops had risen dramatically, as did the size of the transactions.
Secondary deals, as they're known on Wall Street, has tripled in number across the globe in the last five years, according to Dealogic. The value of the transactions rose from $60.77 billion in 2006 to $138 billion in the year to date.
But the credit squeeze has cut lending from banks and put most leveraged buyouts on hold for now, and that spells trouble for the secondary LBO market.
Not being able to buy and sell from each other is a serious blow to private equity firms, which came to depend on their comrades to pay fat prices for portfolio companies when neither the IPO market nor corporate buyers appeared to be viable options.
The end result is that bankers are shelving auctions that were supposed to attract a flurry of private equity firms, rather than risk the chances of a low-ball bid. Buyout firms in the meantime hope the IPO market or strategic buyers come to the rescue. Otherwise, they'd better get used to holding onto companies longer.
"People are taking a wait and see attitude. Potential deals are just on hold right now unless they're strategic," said Marilyn Sonnie, a partner at law firm Jones Day. "Everyone's just waiting to see whether we can clear out this pipeline that needs to be financed."...
The lack of secondary deals may be bad for private equity firms but perhaps good for the companies themselves.
Indeed, such deals have their fair share of critics. After all, since a goal of private equity firms is to trim costs from their companies before selling them, how much more fat can a second private equity owner cut? Secondary buyouts feed the criticism that private equity firms are more focused on fees and financial engineering than operational improvements....
The absence of private equity firms is not only being felt in the secondary market, but it's hitting the corporate M&A scene as well.
Several auctions have failed, even when strategic buyers were expected, because bankers expected buyout firms to at least provide a floor bid, if not a top offer altogether....
Private equity firms losing LBO exit strategy
9/12/07
By Michael Flaherty and Megan Davies
"Private equity firms are seeing the doors shut on a popular exit strategy.
The number of deals in which private equity firms sold their companies to fellow buyout shops had risen dramatically, as did the size of the transactions.
Secondary deals, as they're known on Wall Street, has tripled in number across the globe in the last five years, according to Dealogic. The value of the transactions rose from $60.77 billion in 2006 to $138 billion in the year to date.
But the credit squeeze has cut lending from banks and put most leveraged buyouts on hold for now, and that spells trouble for the secondary LBO market.
Not being able to buy and sell from each other is a serious blow to private equity firms, which came to depend on their comrades to pay fat prices for portfolio companies when neither the IPO market nor corporate buyers appeared to be viable options.
The end result is that bankers are shelving auctions that were supposed to attract a flurry of private equity firms, rather than risk the chances of a low-ball bid. Buyout firms in the meantime hope the IPO market or strategic buyers come to the rescue. Otherwise, they'd better get used to holding onto companies longer.
"People are taking a wait and see attitude. Potential deals are just on hold right now unless they're strategic," said Marilyn Sonnie, a partner at law firm Jones Day. "Everyone's just waiting to see whether we can clear out this pipeline that needs to be financed."...
The lack of secondary deals may be bad for private equity firms but perhaps good for the companies themselves.
Indeed, such deals have their fair share of critics. After all, since a goal of private equity firms is to trim costs from their companies before selling them, how much more fat can a second private equity owner cut? Secondary buyouts feed the criticism that private equity firms are more focused on fees and financial engineering than operational improvements....
The absence of private equity firms is not only being felt in the secondary market, but it's hitting the corporate M&A scene as well.
Several auctions have failed, even when strategic buyers were expected, because bankers expected buyout firms to at least provide a floor bid, if not a top offer altogether....