Bloomberg News delivers an opus on the state of the private equity industry. Its conclusion: Things aren’t nearly as good as they were during the buyout boom.
The 2,800-word article says “the easy money” is gone. The megabuyouts (e.g. Harrah’s, Energy Future Holdings, First Data) are marked below cost. Fund-raising is way down, with their pension-fund patrons handing over their coveted billions at roughly half the rate they did at the market peak. With firms sitting on about half a billion dollars of “dry powder” and with deal activity down some 80 percent, questions are being raised whether the firms will be able to put all this money to work or be forced to return it.
"There is a right-sizing of the industry right now," Joncarlo Mark, senior portfolio manager at the California Public Employees' Retirement System, the nation’s largest pension fund, told Bloomberg News.
Thoughtful quotes from senior buyout executives — David Rubenstein from Carlyle! Alex Navab from K.K.R.! Mark Nunnelly from Bain! — pepper the article. Blackstone’s president, Tony James, gets top billing. The story details how Mr. James had to fly all the way across the country to the Pacific Northwest to secure a $200 million commitment from the Oregon Investment Council for Blackstone's new fund.
Let’s not shed too many tears for Blackstone and their buyout brethren. Blackstone’s $13.5 billion is far less than its record $21.7 billion boom-era fund, but it ain’t too shabby and gives them plenty of money still to do headline-grabbing deals. But Mr. James tells Bloomberg that he and his partners are now taking the time to check in with their investors, something they didn’t do enough in the past.
“We as an industry were lazy,” Mr. James says. "We were unresponsive to our investors. That world is gone."
–Peter Lattman
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