Monday, April 21, 2008

Private equity to the rescue

Just a couple of months ago people were talking as if private equity was dead. Sure, that was and is true for heavily leveraged deals, but private equity comes in a lot of flavors and private equity firms still have many billions of dollars of unleveraged cash sitting idle and ready to be put into action. We are starting to see some action lately. For example, a piece in MarketWatch by Alistair Barr entitled "National City, WaMu get private-equity cash" highlights a couple of the recent private equity deals.

We will be seeing more private equity deals in the weeks and months ahead. The appeal to companies is a ready supply of relatively cheap cash. The appeal to the private equity firms is that they are buying stock at fire-sale prices and on terms that give them some amount of control over the restructuring of the businesses.

The good news for the rest of us is that these cash infusions are helping to stabilize a number of financial institutions and at rational prices and without government intervention.

There is probably still quite a distance to go before we get Humpty Dumpty put back toegther again, but at least we are making decent progress.

-- Jack Krupansky



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