DealZone

Diamonds in the rough

October 1, 2009

Diamond pictureSomewhere out there are ailing companies in need of a turnaround specialist. These experts — also known as company doctors — parachute into troubled businesses to turn their business around.

Funds, such as Oaktree Capital, HIG Capital and Apollo Management, specialise in buying up companies in distress (either through buying equity or debt) and turning them round.

And this should be a great time for these investors — banks are loaded with stakes in troubled companies and unwieldy corporates may want to spin off unwanted businesses.

But banks are not playing ball. They want to wait until the economy recovers and sale values rise. So few companies are up for sale. But the funds want bank sales of stakes to accelerate otherwise it might be too late to turn these companies around.

Private equity certainly has the appetite for new deals. As Reuters reported yesterday, the private equity industry — which may have up to $1 trillion in ‘dry powder’ — is looking to the next restructuring wave for opportunities.

“Sponsors want new proprietary deals to show their limited partners they are not just churning portfolios,” a top investment banker told the Reuters Restructuring Summit.

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