Mergers & Acquisitions |
Private Equity
Take-Private Deals Are
Nearly Extinct on Wall Street
By
WILLIAM ALDEN
September 9, 2014 1:58 pm
| |
Blackstone bought a 20 percent stake in
Versace earlier this year. Instead of doing take-private deals,
some private equity firms are taking minority stakes or doing
other transactions.
Credit Eric
Thayer/Reuters
|
The private equity firms of Wall Street have all
but stopped taking companies private.
Firms like Kohlberg Kravis Roberts and the
Blackstone Group — known for using billions of dollars in capital and
large amounts of debt to buy publicly traded companies — have
virtually ceased such “take-private” transactions this year, Goldman
Sachs analysts noted in a research report on Tuesday. The drop-off in
activity has occurred even as the
broader market for mergers and acquisitions
has boomed.
Not a single take-private deal worth more than $5
billion has been struck this year, the report said. That compares to
four deals above $5 billion in 2013 and 17 such deals in 2007, the
year before the financial crisis struck.
All told, the take-private deals this year have
totaled just $3 billion, compared with $80 billion for all of last
year and an average of $75 billion from 2004 to 2013, according to the
report on leveraged buyouts, titled “Where have all the L.B.O.s gone?”
A chief cause of the extended hiatus may be the
soaring stock market, which makes companies more expensive to buy.
The Goldman research analysts said that corporate
acquirers tended to be more willing than private equity firms to pay a
premium for takeover targets. Corporations can point to business
synergies to justify a high price, and they can use their own richly
valued stock to finance deals.
With private equity firms shying away from such
activity, many have turned to other types of deals, including buying
minority stakes in companies or scooping up companies that other
private equity firms are selling. Blackstone, for example,
bought a 20 percent stake in
Versace this year. And it later paid $5.4 billion to buy the
industrial manufacturer Gates Corporation from the private equity firm
Onex and the Canadian Pension Plan Investment Board —
a sizable deal, but not a
take-private transaction.
Firms are also looking abroad for opportunities,
the Goldman analysts said, noting that both Blackstone and K.K.R. have
said that at least half of their recent investments have been outside
of the United States. Private equity firms may also continue to team
up with other types of firms, as the Brazilian private equity investor
3G Capital did with Berkshire Hathaway in buying H.J. Heinz last year,
the analysts said.
What might spur private equity firms to return to
take-private deals? A market downturn, for one thing.
“We believe purchase price is one of the greatest
determinants of investment performance,” Leon D. Black, the chief
executive of the private equity giant Apollo Global Management, said
on a conference call in August. “And so if that means waiting longer
for opportunities, we will happily wait.”
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The New York Times Company |
