The return of strategic deals?
The popular idea now is that the Golden Era of private equity has ended. And with that comes the notion that strategic buyers will reassert themselves. It makes a lot of sense. Many companies have been hoarding cash, and that can be used as currency. Remember that all-stock deals can be structured as tax-free swaps. Financial Week offers a list of companies with a lot of buying power built up. ExxonMobil, for example, holds 2.4 billion shares of its own stock, with a market value $200 billion which would be enough to buy top competitors. If we see this emerge as a trend, it will hearken back to the previous deal boom, back in the 1999-2000 period, when stock swaps were all the rage. Cash deals will have a hard time, and you can count on the percentage of sponsor-backed deals to fall from the 40 percent it hit in the second quarter.
For more:
- here's the article from Financial Week
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Comments
By Brian Hickey | Posted 11:24am | June 16, 2008
If you limit the discussion to large publicly traded companies and mega-cap buyout funds, this thesis is obvious wherever one looks. Look at the middle-market stratum and you'll see that, with minor adjustments (re-equitizing portfolio companies, and some downward adjustment of expectations with regard to returns), PE is alive and well. And that refers to firms applying operational changes -- not just financial engineering.