The big deals announced this year have definitely been of the strategic variety, which is good news to the industry bankers at the bulge bracket investment banks. For the big financial sponsors, however, this is lamentable news. They are not seeing the same opportunities that corporate buyers are.

Indeed, Blackstone's COO said last week that plain vanilla LBOs are too pricey at the moment. Perhaps financial sponsors are having trouble competing with companies that have been hoarding cash, waiting for the right opportunity.

The debt-driven LBOs are less likely to be consummated these days, even though the leveraged loan market has recovered a bit. Lenders will have stricter terms and require more cash, even as prices go up.

In a telling move, Blackstone announced strong net earnings of 51 cents per share, trouncing the average expectation of 41 cents. The private equity firm took the opportunity to talk about its efforts to diversify away from traditional LBOs, putting its cash to work in emerging markets like Russia, energy deals and small company growth opportunities. Real estate also looms as an opportunity.

For more:
- here's a Reuters article

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