“Will there be another megabuyout?” Quadrangle’s Rattner asks

August 2, 2007

steverattner.jpgQuadrangle Group, the media/communications private equity firm, announced the hiring of Daniel Rosensweig, former COO at Yahoo! and Edward Sippel, who was a managing director at TVG Capital. Rosensweig will open an office in Silicon Valley in California, in September, while Sippel will open a new office in Hong Kong in the second half of 2008.

DealZone caught up with Quadrangle’s managing principal Steven Rattner late on Wednesday and asked about the move to Silicon Valley, the credit market fallout, and how to proceed in this current environment. Rattner predicted in June that the credit markets were poised for a tumble, a call Rattner admits came faster than he expected. For a full transcript of the interview click here. Below are some excerpts from the conversation.

On hiring Rosensweig and whether that means Quadrangle will focus more on tech:

“I don’t view our move today as shifting to a tech focus at all. What made Dan attractive to us is that his background is on the media and new media side. We’re not looking to dramatically increase our exposure to tech.”

On how much further the credit markets can pull back:

“It’s hard to know. I was more lucky than smart–and that’s not false modesty. I didn’t realize I’d be right so quickly. How much further do they go is hard to tell. There has been a lot written about on this enormous wall of supply out there, but there is also an enormous amount of demand. There is a lot of money put into pools in anticipation of this kind of market opportunity, and just watching the last few days, when the credit markets were going down, you’ve seen some buying come in. “

“The second thing to remember is that the default rate is still approximately zero. I don’t think there is a huge amount of fear out there to keep pushing this market down. Seems to have found a level. I do believe that the default rate will go up. I do believe that a lot of these deals were over leveraged and under equitized and will eventually get into trouble. ”

On whether what’s happening in the credit markets will lead to a recession:

“The question is – will all this financial turmoil spill into the rest of the economy? Clearly there is going to be an impact, most immediately on New York and Wall Street. The investment banking business is about to, and is getting, tougher, and that’s going to impact bonuses and hiring. It’s possible the economy will slow and that’s what will bring these deals down.”

On what other impacts the credit market shut down will have:

“Will there ever be another megabuyout again? I think the chances of a megabuyout is on hold, reasonably, indefinitely.”
 

(Photo. Steven Rattner, Reuters file)

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