A Case for Optimism for Buy-Outs
Events like Dow Jones Private Equity Analyst conference usually get a significant amount of coverage due to the parent sponsor (Dow Jones) and the wealth of other news services that cater to private equity news. Most of the major headlines have already been widely distributed based on commentary from panel discussions, but often it is hard to get the gist of how those sound bites were really delivered. That to me is more telling than the content itself.
First off, nobody at the conference was painting a picture that the last year has been anything but a mess. Hats off to Guy Hands who had probably the most genuine dialog in the history of panel discussions when he talked about Terra Firma’s troubles along with his call for reassessing goals for private equity practitioners. He was not beaten, but seemingly weary (jet lag can be the culprit as well) and I could not blame him with the millstone of the EMI acquisition hanging from him. Other panelists expressed concern from the slowdown in deal flow, but all seemed bullish regarding the upcoming rebound. Mid-market and mega funds expressed similar sentiments regarding upcoming quarters with their target company sizes dropping slightly due to financing constraints. One of my real tests was to catch Scott Sperling, the co-CEO of THL Partners, after his discussion regarding the need for more debt financing and convergence of buyer/seller expectations to see if the story was the same. As expected, he was just as confident in a side conversation as he was on the stage in front of the crowd (also one of the nicest guys you could meet). David Rubenstein, founder of the Carlyle Group, was not just confident; the man was absolutely locked in. He showed no hesitation during his Q&A interview to close the conference which was not a collection of softball questions by any means. He quickly and affirmatively addressed every item presented even when pressed by the questioner. Granted, this empirical test does not mean we are about to see a collection of multi-billion dollar deals close any time soon. However, it does signal that the buy-out business is ready to bounce back based on the way they were saying it and not just what they said. In my opinion, that is the real test.
