New Year’s resolutions for PE, Cerberus?

January 2, 2009

comic-book-guyFor M&A bankers, 2008 is perhaps best remembered using the catchphrase of Comic Book Guy from The Simpsons: “Worst. Year. Ever.”
Dealmaking reached record lows in 2008, dominated by cancelled deals. At the start of 2009, questions linger about several companies, executives and deals. Most notably, though, there is a big question mark over private equity.     

Last year was a bad year for PE firms as credit markets became too tight, stocks fell unpredictably low, and deals that were announced in better times began falling apart.  PE deals fell to a five-year low.

The ‘Golden Age’ of PE quickly faded as many of the biggest buyouts announced in 2007 collapsed in 2008, including the $41 billion deal for Canadian telecommunications operator BCE, the largest announced buyout in history.    

And many of the deals that did close are lining up to file for bankruptcy. Leverage – the backbone of PE deals — should be hard to come by for some time. And with the IPO market still frozen, firms will likely be holding on to their purchases much longer.    

Attention-shy Cerberus struggled this year with two bad bets –GMAC and Chrysler. The government stepped in to help the auto industry – and Cerberus benefitted too.   

As part of that deal, Cerberus had to hand over much of its GMAC stake to its investors. A big question for 2009 is whether investors will be able to get rid of their shares.

The handout of billions of dollars from the Treasury to Chrysler also put into question on Cerberus’ plans for the automaker in 2009. Unlike General Motors, Cerberus has provided few details on how it plans to make Chrysler viable. 

** Immunodiagnostic Systems Holdings Plc said it sold its money-losing haematology business unit to Escalon Medical Corp, a Nasdaq-listed healthcare company, for 4.2 million euros.  

** British gaming firm NetPlay TV Plc said it acquired and, the mobile gambling and skill gaming businesses of Info-download Ltd, a unit of Zed Worldwide SA, for 1 million pounds ($1.46 million) in stock.

One comment so far | RSS Comments RSS

In the deal world small has become the new big!

Yes, M & A activity in hard dollars for 2009 likely will continue to be down; however, acquisitions within the lower middle market will likely and dramatically increase in the total numbers of acquisitions where the deals are less complicated, synergistic, and as well these deals usually reflect a higher ROI.

The money seeking investment has not disappeared, it is just very cool to the large deal. Much of he available money is sitting in -0- % treasuries, and as such is tremendously under utilized. This money must “go to work”.

Gene Sartin
President & CEO
The Transition Companies


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