Senior private equity players from Blackstone and KKR said the stable economic outlook and availability of financing have the buyout industry back in the swing of things and only the lack of the right opportunity is preventing deal sizes from climbing.<\/p>\n
Blackstone\u2019s Chinh Chu, speaking at an M&A panel hosted by Bloomberg Tradebook Tuesday night, pointed to his firm\u2019s recent acquisition of 600 U.S. shopping malls from Australia\u2019s Centro Properties for $9.4 billion as an example of the ability to get large deals done. Meanwhile, KKR\u2019s Marc Lipschultz argued that the focus should be broader, noting that the bulk of deals made by even the largest private equity firms are below $1 billion.<\/p>\n
\u201cIt\u2019s about finding the right opportunities, I don\u2019t think you go out looking for a certain size deal,\u201d said Lipschultz, who was part of the $45 billion buyout of TXU (now Energy Holdings) in 2007.<\/p>\n
The panel, which included Andrew Bednar from investment bank Perella Weinberg as well, agreed that the only limit on the size of buyouts is the depth of debt markets. And there are encouraging signs on that front, from inflows into fixed-income mutual funds to JPMorgan Chase\u2019s commitment to put together a $20 billion financing package for AT&T\u2019s acquisition of T-Mobile.<\/p>\n
An abundance of cash on corporate balance sheets is also aiding the M&A comeback, but as Chu pointed out that can give strategic bidders an advantage over financial sponsors like Blackstone. (See \u201cBlackstone Back Story Shows Private Equity Growing Pains.\u201d)<\/p>\n
\u201cOur cost of capital is an advantage,\u201d said Chu, who participated in deals for Biomet and BankUnited among others. That advantage is rarely larger than the synergies that can be wrung out of a business by a strategic buyer though, which is why private equity rarely bests corporate suitors.<\/p>\n
Of course, firms like KKR and Blackstone have such large portfolios that they are often strategic buyers themselves, Chu and Lipschultz suggested, since a potential target can sometimes be a fit with a previously-acquired business.<\/p>\n
In sectors like technology it can be even harder for private equity to compete, since valuations in some areas are sky-high and acquirers can use cash on hand and richly-valued stock to make deals.<\/p>\n
Seagate Technology is one that Perella Weinberg\u2019s Bednar suggested as an example of a potential private equity play in the space, noting past interest and calling it a \u201cstable business with lots of cash\u201d that could be leveraged because its valuation isn\u2019t too stretched.<\/p>\n
Bednar, who is advising NYSE Euronext on its planned merger with Deutsche Borse, also got an interesting look into what the public thinks of that deal before the panel began. A survey conducted just prior to the discussion showed that 48% of the hundred or so in attendance expect the Deutsche Borse bid to win out, while 24% expect Nasdaq\u2019s rival bid with IntercontinentalExchange to win and 28% say neither will tie up with the NYSE. (See \u201cFight For NYSE Likely To Come Down To Shareholders.\u201d)<\/p>\n
The process of deals getting done was also discussed, with the panel touching on go-shop provisions, staple financing and recent rulings in the buyouts of Del Monte Foods and J. Crew Group that are likely to force corporate boards to be ever more diligent about the deals they get involved with.<\/p>\n
Bednar said his firm is often getting brought into the process earlier. \u201cIt sounds like an advertisement,\u201d he acknowledged, but it is also a smart move since you \u201ccan\u2019t erase the snow tracks\u201d when the start of a sale process is flawed.<\/p>\n
The Del Monte case saw Barclays Capital accused of a conflict of interest for advising the seller and providing financing to bidders. Perella Weinberg does not provide staple financing, Bednar said, because of that \u201cinherent conflict.\u201d<\/p>\n
The J. Crew case, Bednar continued, is a good example of why so-called \u201cgo-shop\u201d processes designed to solicit higher bids rarely do. That is because in the current environment, when markets allow buyers to provide a reasonable multiple, get financing, offer an attractive premium and clear the deal with shareholders, the initial bid is likely to be fully valued.<\/p>\n
In the case of J. Crew, a deal he worked on, Bednar notes that the offer from TPG and Leonard Green & Partners was for 9 times cash flow. Few other retailers were going for 8.5 times cash flow, Bednar said. \u201cIt\u2019s all about if there is more value out there.\u201d If there is, he said, someone will step up to take it.<\/p>\n
SOURCE<\/a> Senior private equity players from Blackstone and KKR said the stable economic outlook and availability of financing have the buyout<\/p>\n","protected":false},"author":1213,"featured_media":72448,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"colormag_page_container_layout":"default_layout","colormag_page_sidebar_layout":"default_layout","footnotes":""},"categories":[1],"tags":[],"class_list":["post-8315","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"magazineBlocksPostFeaturedMedia":{"thumbnail":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u-113x150.jpg","medium":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","medium_large":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","large":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","1536x1536":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","2048x2048":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","colormag-highlighted-post":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","colormag-featured-post-medium":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","colormag-featured-post-small":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u-113x90.jpg","colormag-featured-image":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","colormag-default-news":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u-113x150.jpg","colormag-featured-image-large":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","colormag-elementor-block-extra-large-thumbnail":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","colormag-elementor-grid-large-thumbnail":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","colormag-elementor-grid-small-thumbnail":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg","colormag-elementor-grid-medium-large-thumbnail":"https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg"},"magazineBlocksPostAuthor":{"name":"Joshua","avatar":"https:\/\/secure.gravatar.com\/avatar\/62ee23f8f40307578d1f284ecd823d77f32da8ea35541e7dbdafeb5da1a4e877?s=96&d=mm&r=g"},"magazineBlocksPostCommentsNumber":"0","magazineBlocksPostExcerpt":"Senior private equity players from Blackstone and KKR said the stable economic outlook and availability of financing have the buyout","magazineBlocksPostCategories":["News"],"magazineBlocksPostViewCount":138,"magazineBlocksPostReadTime":4,"magazine_blocks_featured_image_url":{"full":["https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg",113,170,false],"medium":["https:\/\/asiancemagazine.com\/wp-content\/uploads\/u.jpg",113,170,false],"thumbnail":["https:\/\/asiancemagazine.com\/wp-content\/uploads\/u-113x150.jpg",113,150,true]},"magazine_blocks_author":{"display_name":"Joshua","author_link":"https:\/\/asiancemagazine.com\/?author=1213"},"magazine_blocks_comment":0,"magazine_blocks_author_image":"https:\/\/secure.gravatar.com\/avatar\/62ee23f8f40307578d1f284ecd823d77f32da8ea35541e7dbdafeb5da1a4e877?s=96&d=mm&r=g","magazine_blocks_category":"News<\/a>","_links":{"self":[{"href":"https:\/\/asiancemagazine.com\/index.php?rest_route=\/wp\/v2\/posts\/8315","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/asiancemagazine.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/asiancemagazine.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/asiancemagazine.com\/index.php?rest_route=\/wp\/v2\/users\/1213"}],"replies":[{"embeddable":true,"href":"https:\/\/asiancemagazine.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8315"}],"version-history":[{"count":0,"href":"https:\/\/asiancemagazine.com\/index.php?rest_route=\/wp\/v2\/posts\/8315\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/asiancemagazine.com\/index.php?rest_route=\/wp\/v2\/media\/72448"}],"wp:attachment":[{"href":"https:\/\/asiancemagazine.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8315"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/asiancemagazine.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8315"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/asiancemagazine.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8315"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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