Restarting the Deal Machine
February 1, 2010
A new white paper from Grant Thornton suggests there may be some signs of life in the CLO universe. The paper cited that JPMorgan, Wells Fargo, Bank of America and Citigroup are all underwriting new vehicles, and pointed to forecasts calling for between $3 billion and $6 billion of new CLO issuance this year.
This would have barely have been a drop in the bucket three years ago, but today it could serve as the smelling salts that snap private equity out of its slumber.
One manager I spoke to recently said he expects to see a re-emergence of the CLO market by the fourth quarter, and that, he said, should serve to kickstart the deal machine.
My question, though, is what will be different this time around?
CLOs, to a lot of people, still symbolize the absence of underwriting standards that created the dislocation in the credit market in the first place. While it's their cousins, the CDOs that created most of the wreckage, one might assume that the return of the market, while good for M&A, could send lenders back to their old ways of doing business.
According to my source, the difference this time around is that lenders know they're being watched.
"The banks and nonbank players that were integral in feeding that business are not going to be utilizing the same toolbox. The banking regulations and capital restrictions will prevent anyone being levered 35 to 1. They'll also have exposure on their own balance sheets, so there will be self regulation as well."
I'm not sure that provides a complete answer, but with $6 billion representing the high-end of an optimistic range, I suppose it'll work for 2010.
I keep seeing stories and surveys discussing the likelihood for consolidation in private equity. I really wish they'd just use the word contraction, because I can't foresee any scenario where the asset class truly consolidates in the traditional sense.
There have been a few 'mergers' involving private equity firms in the past. Apax Partners' subsumption of Saunders Karp Megrue is the only traditional merger in recent history that really comes to mind. If you're looking for a loose interpretation, Invesco's acquisition of WL Ross or Lazard's purchase of the Edgewater Funds might qualify.
But by and large, I think it's foolish for a GP that can't raise another fund to envision a scenario in which a rival firm acquires their business. I can't think of a case where this has really worked out. It's not like two airlines merging, where you're eliminating a competitor. By some counts, there is well over 1,400 general partnerships.
Still, the Wall Street Journal, yesterday, published a study in which four fifths of GPs surveyed expect "a wave of closures or mergers within the industry."
The only way I can see this happening is if a traditional firm brings on new capabilities. A generalist, for instance, may absorb a distressed firm. Alternatively, there could be opportunities for cross-border marriages. Apax actually used that model too, although Alan Patricof's exit was what opened the door for SKM's arrival.
With that said, any consolidation will probably be an exception to the rule. Those who can raise funds will, and those who can't won't generate any interest from rival partnerships.
There are certain deals that are just destined to fail. Credit should go those that are smart enough to walk away.
Movie Gallery, which is nearing liquidation, probably sealed its fate when it acquired Hollywood Video back in 2005 for $1.2 billion. I remember covering this transaction early on after Leonard Green & Partners originally agreed to acquire Hollywood for $10.25 a share. Blockbuster also made a hostile bid, valuing the company at $14.50 a share, although both walked, leaving Movie Gallery with the prize.
We all had those friends in college who would casually hand someone their garbage. They'd pretend to tie their shoe, ask someone to hold an empty bottle or something like that, and then refuse to take it back. For some reason, it always used to bring me a lot of satisfaction when executed correctly.
Either way, it kind of reminds me of the Hollywood Video deal. I would have been curious to see what Leonard Green could've done with the assets. They've always had a knack with retail, so I'm pretty sure the outcome would've been a bit different. With that said, I'm guessing both Leonard Green and Blockbuster are thankful they didn't get stuck with that deal even at a discount.
At the Argyle Executive Forum last week, one of the panelists addressed the crowd asking for a show of hands from corporate executives that are engaged in venture capital activity. I was surprised when roughly half raised their hands. This would hardly be considered a tech-leaning crowd.
Michael Frankel, who heads up corporate development for LexisNexis and served as moderator, noted that the goal with these initiatives is rarely a path to ownership. That, he said, is usually pretty expensive. Rather, it's about developing a commercial relationship.
I had conversation following the panel in which an executive at a tech company said that for them, it's about creating a market for their next generation products.
In my days covering venture, these types of initiatives seemed to run hot and cold depending on the market. And you rarely saw companies like Best Buy active in the space. I think it's actually pretty telling that in today's environment, companies that you wouldn't necessarily think of as cutting edge are so focused on innovation.
That's one of the more encouraging things I've seen in a long time.
54 Comments
Thanks for the nice blog. It was very useful for me. Keep sharing such ideas in the future as well. This was actually what I was looking for, and I am glad to came here! Thanks for sharing the such information with us. Best blog. donna cerca uomo treviso and donna cerca uomo brescia. Thanks!
Posted by: Jack L | February 27, 2012 5:39 AM
Hi,The posting in this new look shoes site is very cool and also car insurance interesting.I had read the entire blog and I came to know many things which dental insurance I don't know before.I am sure that the visitors who visit this site will also be enjoying reading the posts
gallbladder
Posted by: sajib k | February 25, 2012 10:46 PM
I really liked it. I was searching for such information. Day Trading Training
Posted by: satish b | February 24, 2012 3:39 AM
Spring coming up, Louis Vuitton Outlet Store the Louis Vuitton Outlet Online all-match classic medium bag will be for you but a simple, open design, reflects the bag atmospheric!
Posted by: leo c | February 23, 2012 9:13 PM
Thanks for the nice blog. It was very useful for me. Keep sharing such ideas in the future as well. This was actually what I was looking for, and I am glad to came here! Thanks for sharing the such information with us. incontri roma incontri milano
Posted by: Jack L | February 23, 2012 4:01 AM
I really liked it. I was searching for such information. Thanks for sharing such an helpful post. map of usa
Posted by: satish b | February 21, 2012 4:27 AM
Thanks for the nice blog. It was very useful for me. Keep sharing such ideas in the future as well. This was actually what I was looking for, and I am glad to came here! Thanks for sharing the such information with us. bakekaincontri
Posted by: Jack L | February 21, 2012 3:28 AM
I don't understand wesely snips clothing what you are actually trying to say...Can you please tell me in Arnold Schwarzenegger Costume detail.
Posted by: mike a | February 17, 2012 6:23 AM
Playing the What's In Your Box. Deal or No Deal Fruit Machine, select the Win Stopper feature to earn additional money. Three lights flash around the board. Press the Stop button when the lights are over the last number to stop the lights. Two lights will then go around the board press the Stop button when they're on the last number. Thanks. Regards, Scottsdale real estate
Posted by: santa w | February 15, 2012 12:39 AM
Favorite post having such an fantastic and useful informative content. describing good blogging concepts as well as basics that are very much useful in skilled content writing as well. portachiavi personalizzati donna cerca uomo roma
Posted by: Jack L | February 14, 2012 3:36 AM
I really loved reading your blog. Water Damage Tampa
Posted by: satish b | February 13, 2012 4:57 AM
Thanks for this read mate. Well, this is my first visit to your blog! But I admire the precious time and effort you put into it, especially into interesting articles you share here! annunci donne milano and incontri roma and annunci donne roma and incontri milano
Posted by: Jack L | February 9, 2012 4:24 AM
Thanks for this read mate. Well, this is my first visit to your blog! But I admire the precious time and effort you put into it, especially into interesting articles you share here! annunci donne milano and incontri roma and annunci donne roma and incontri milano
Posted by: Jack L | February 9, 2012 4:23 AM
Brilliant article my friend, but could you teach me more detail about your post. best dating sites
Posted by: satish b | February 8, 2012 5:27 AM
Some interesting and well researched information on photos. I'll put a link to this site on my blog. Thank you! SWAROVSKI BEADS
Posted by: Abraham J | February 6, 2012 6:31 AM
Your blog article is very interesting and fantastic, at the same time the blog theme is unique and perfect, great job. donna cerca uomo milano chiamami
Posted by: Jack L | February 1, 2012 9:30 AM
very informative blog you have, thanks for sharing web design services, seo company australia, web page designers
Posted by: paul y | January 31, 2012 4:16 AM
This type of track record can make it tough for bankers fighting the perception that 50% of all deals fail. I would also think that it would scare some from selling out, yet new deals continue to crop up. I was even talking to a banker at an independent firm earlier this year who cited that a sale is ultimately the outcome most boutiques are hoping for. natural pink lips = how to get pink lips = lip care = winter lip care = home made lip gloss = home made lip balm =
Posted by: ozil j | January 30, 2012 1:41 AM
Absorbing that does not waste minutes of your life like what you see on countless other sites. Duoderm
Posted by: Kelly W | January 27, 2012 10:32 AM
ecommerce designer PPC advertising ecommerce websites unlimited web hosting Singapore virtual office search marketing seo packages website design companies ecommerce business
Posted by: sed d | January 17, 2012 5:09 AM
ecommerce website pay per click search engine marketing E-Commerce ecommerce design cash loan business loan international call services Door Locks Security company Maternity Clothing Top hair salons
Posted by: sed d | January 17, 2012 5:09 AM
bailey uggs on sale large cheap ugg bailey button while they bad as hell. uggs classic mini third floor of the structure with different uggs classic short especially in the most happy time tall uggs for sale and placed a beautiful bacon and the like. uggs bailey buttons should now have to be dead product as a mountain ugg bailey button cheap
Posted by: cheapuggs b | January 16, 2012 9:18 PM
I tried to think so, but i found it was not as the same in the actual process. As you mentioned, I still have doubts, but really thank you for sharing!LED spotlight
Posted by: ray z | January 16, 2012 2:25 AM
Good post, thanks for taking time to discuss this subject.Wart Removal
Posted by: rossie g | January 15, 2012 11:35 PM
This is a really great post I found some really good information here I've got lots of followers on twitter and I will tell all of them about this as I really think it's great information that more people should see keep up the good work be back again soon. seo software iphone cases
Posted by: rob w | January 12, 2012 11:47 AM
Nice blog, it's is really organized I thought at first it empty..Anyway thanks for the info you've post here. it's useful.
research papers | term papers | essays | dissertations | theses
Posted by: Anon y | January 12, 2012 12:00 AM
Superb work! This info will be very useful for a lot of people. I love the blog very much. Thanks for sharing the info guys. university essays | cheap custom essays
Posted by: smith h | January 11, 2012 3:28 AM
house style human hair wigs beauty&style
Posted by: Bjorn w | January 11, 2012 12:51 AM
home styles furniture human hair wigs beauty&style
Posted by: Bjorn w | January 11, 2012 12:49 AM
My partner and I stumbled over here from a different page and thought I might as well check things out. I like what I see so i am just following you. Look forward to looking into your web page yet again. stop snoring mouthpiece
Posted by: drew b | January 8, 2012 10:35 PM
I am researching this topic for pay per click management
Posted by: Reasthous12 R | January 5, 2012 6:21 AM
Interesting post and thanks for sharing. Some things in here I have not thought about before.Thanks for making such a cool post which is really very well written. Will be referring a lot of friends about this. Keep blogging skin moles
Posted by: simon s | January 4, 2012 12:51 AM
Thanks for taking the time to discuss and share this with us, I for one feel strongly about it and really enjoyed learning more about this topic.Alprazolam dosage
Posted by: Alprazolam d | December 31, 2011 3:23 AM
cheap uggs for sale Misunderstanding, this is our fate of such people.ugg outlet online In the churn, end, only the last, the only idea, the idea of ??the same firm: death! - I lie down to sleep, wake up the morningugg boots for sale.
Posted by: meter g | December 30, 2011 12:30 AM
As today what will happen we can't say..Anyways i am glad their is always some people like you busy making posts like this that actually make a difference. It was nice reading about this. Here I find really very new & valuable information. VigRX Plus and Dental White
Posted by: David J | December 27, 2011 1:41 PM
Thanks a lot mate for putting effort in writing this amazingly useful article! Male Enhancement Pills and Bathmate
Posted by: David J | December 27, 2011 9:52 AM
You have a great knowledge on subject.Thanks for sharing such an article where education of people matters the most. Dental White and Sytropin
Posted by: Bruce M | December 26, 2011 6:41 PM
That's really a marvelous post. This post contains useful information which helps us a lot. I have never seen such a great post. your wonderful post can inspire a lot and helps us. I visit your website often and share with my friends. Best Diet Pills Male Extra and Bathmate
Posted by: Bruce M | December 26, 2011 6:32 PM
That's really a marvelous post. This post contains useful information which helps us a lot. I have never seen such a great post. your wonderful post can inspire a lot and helps us. I visit your website often and share with my friends. Human Growth Hormone GenF20 Plus
Posted by: Bruce M | December 26, 2011 6:23 PM
I have you bookmarked your web site to check out the brand new stuff you post. Should you're keen on having a visitor web blog poster please reply and let me know. I will give you unique content in your website, thanks. HGH Advanced Review and UniqueHoodia
Posted by: Bruce M | December 26, 2011 6:17 PM
Thanks for taking the time to discuss and share this with us, I for one feel strongly about it and really enjoyed learning more about this topic. I can see that you possess a degree of expertise on this subject, I would very a lot like to hear much more from you on this subject matter. Slim Weight Patch and Pure Acai Berry Max
Posted by: Bruce M | December 26, 2011 6:10 PM
Thanks for taking the time to discuss and share this with us, I for one feel strongly about it and really enjoyed learning more about this topic. I can see that you possess a degree of expertise on this subject, I would very a lot like to hear much more from you on this subject matter. Capsiplex and Meratol
Posted by: Bruce M | December 26, 2011 6:06 PM
I have surf the internet looking for topics such as these and it is here where I find it written and stated well. Diet Tea and Tava Tea
Posted by: Bruce M | December 26, 2011 5:55 PM
I wanted to thank you for this great read!! I definitely enjoying every little bit of it I have you bookmarked to check out new stuff you post. Take a look at HGH Advanced or other HGH Supplements
Posted by: Bruce M | December 26, 2011 5:47 PM
Hello,I love reading through your blog, I wanted to leave a little comment to support you and wish you a good continuation. Wishing you the best of luck for all your blogging efforts. Teeth Whitening Reviews or HGH
Posted by: Bruce M | December 26, 2011 5:41 PM
This is a great inspiring article. I am pretty much pleased with your good work. You put really very helpful information. Keep it up. Keep blogging. Looking to reading your next post. Provacyl and GenFX
Posted by: Bruce M | December 26, 2011 5:36 PM
Great posting! I really like the way you are sharing the unique take on this subject. Keep it up! Proactol Plus and Ultimate Maqui Berry
Posted by: Bruce M | December 26, 2011 5:18 PM
Really a very nice discussion is done by you here. I like it and hope, you will continue sharing your thoughts with me in future also. Phen375 Nuratrim
Posted by: Bruce M | December 26, 2011 5:07 PM
This really is another really very amazing and interesting publish. european jaw crusher
Posted by: ray z | December 19, 2011 2:19 AM
Looking attractive and smart in the fingers of the other people has been the aspiration for any ladies. In order to get noticed instantly, pandora jewelry have the new philosophy of out standing fashion quality.So what is the best choice for you to show yourself .The answer is pandora bracelets.The Pandora range of rings is a wealth of beautiful gemstones and precious metals combined with fabulous design. pandora jewelry sale store offer pandora bracelets and pandora charms,welcome to pandora bracelets sale outlet.up to 70% discount.north face outlet sale The north face denali jacket Made with the North Face's warmest fleece, the Men's north face denali is all about keeping you comfortably balmy, no matter how nose-freezingly cold it gets. Best of all, the north face clearance is good at making friends; it's zip-in compatible with North Face shells, so when the weather goes from ice-cold to ice everywhere, you can just zip on a shell and continue on in the comfortable warmth of the North Face Denali jacket, north face outlet store online.
Posted by: farily b | December 19, 2011 12:09 AM
Hi Great website thanks for all the great infomation on your website it is very informative keep up the great work.christmas flowers italy | flowers delivery usa
Posted by: rozina s | December 16, 2011 10:18 PM
Hello,I love reading through your blog, I wanted to leave a little comment to support you and wish you a good continuation. Wishing you the best of luck for all your blogging efforts.ccnp dumps// ccie dumps// pmp dumps// security+ dumps// Network+ dumps// Vmware dumps// cisco dumps// microsoft dumps//
Posted by: johns a | December 10, 2011 3:56 AM
I was surprised when roughly half raised their hands. This would hardly be considered a tech-leaning crowd.android tablet pc
Posted by: Knife M | December 7, 2011 9:35 PM
cheap north face jackets is one of the best outdoor equipments.Our north face jackets on sale online has offered jackets for men, women and kids, and other equipments, such as backpacks,in the whole world. All these discount north face jackets can satisfy the demands that outdoor enthusiasts need during doing outdoor sports. As it is a best cheap north face of outdoor products, more and more outdoor enthusiasts like to prepare the equipments of the north face jackets before doing outdoor sports.So, if you want to buy discount north face, you can look for it in North Face outlet here.
Posted by: zhao m | December 5, 2011 8:53 PM
Add Your Comments...
Already Registered?
If you have already registered to Money Management Executive, please use the form below to login. When completed you will immeditely be directed to post a comment.
Not Registered?
You must be registered to post a comment. Click here to register.