Once fervently pro-deal-life, PE firms are increasingly finding that they support a fund manager’s right to choose. Scared by agit-prop that preached the dangers of back Park Avenue alley dealbortions, hanging up a deal (on the following hanger, pictured) used to be a rare event when cheap debt flowed freely from the banker’s teat and your baby could be flipped when he grew up to be big, deleveraged and strong.
The pro-deal-life movement warned of the reputational risks - you’re used goods, you’ll never be able to raise another little fund of your own knowing that you murdered a little return generator. With $300 billion of LBO debt ready to hit the market starting in September, there looks to be a cascade of partial birth dealbortions, following the example of none other than pro-fund-manager-choice pioneer Henry Kravis.
Deal Journal reports on the dirty little secret in Kravis’ past. When KKR was young and foolish and engaged in rampant unprotected dealmakinig during the mid-90s boom it got a little irresponsible and pledged $2.7 billion to Xerox’s baby girl Talegen Holdings, an insurance unit. When KKR sobered up, it realized that it made a horrible mistake, and took care of it, in what was the largest dealbortion ever up to that point. KKR has hardly suffered, proving that aborting a deal is quick, easy and painless, and may be the standard course of action for the remainder of the year.
Over-Rated! Why Walking Away from LBO Deals Isn’t So Bad [Deal Journal]
Posted by anon, Aug 20, 2007 1:12PM
this is really really poor taste