The financial services industry is now in play for private equity buyers, the Deal Journal guys have been arguing. And neither burdensome regulation nor the need to finance buyouts with high-cost “junk” bonds seems to be a serious obstacle. As counter-intuitive as it may sound, regulation and high debt costs may make some companies more attractive to private equity.
“There’s almost no company that is off-limits for private equity these days,” Deal Journal’s Dana Cimilluca says in the video above. In the accompanying text he adds, “And it raises the following question: if the student loan company isn’t afraid of a little junk, who else in the financial world might be willing to take the private equity plunge?”
Part of the reason for this change in perception is the willingness of deep-pocketed banks to partner with private equity firms in recent deals. Banks that once provided debt financing for deals now also seem willing to provide equity—either temporary bridge equity in the TXU buyout or permanent partnership equity in the Salle Mae deal. This helps makes riskier and larger deals more affordable to the buyout guys.
(Also, our thanks go out to the Deal Journal guys for explaining who Friedman, Fleischer & Lowe—the fourth member of the JP Morgan Chase, Bank of America and J.C. Flowers foursome that has agreed to buy Salle Mae—is and why we should have known about them already.)
Sallie Mae Breaks the Buyout Barrier … is Countrywide Next? [Deal Journal]