Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Friday, June 8, 2007

"Buyout Fatigue?"

Could rising interest rates and falling stock prices put a stop to the private equity deals?  A whopping $250 billion will be raised in coming months in high yield bonds and other debt to finance buyouts, but some report "buyout fatigue."  See WSJ, Market Pressures Test Resilience Of Buyout  Boom.  In addition, some savvy shareholders are learning to hold out for higher stock prices, making deals more expensive.  The sweetened bid for Biomet is the latest example of this trend; see NY Times, Biomet Accepts Sweetened Takeover Offer.

Meanwhile, there are signs of more failed LBOs.  Companies that have gone private are generating cash that exceeds their debt interest payments by just 1.7 times -- a ten-year low.  (It was 2.4 times last year, and 3.4 times two years ago.)  The Wall St. Journal also reports on several LBOs that are in trouble, including Linens 'n' Things, the Star Tribune in Minneapolis, Freescale Semiconductor Holdings, and Realogy.  See WSJ, Boom Aside, Not All LBOsLook So Hot.

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