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The keynote panel at The Deal's M&A Outlook 2008 conference featured three of Wall Street's top dealmakers: Bruce Wasserstein, chairman and CEO of Lazard and chairman of The Deal LLC; Leon Black, founder of Apollo Management; and Martin Lipton, a partner at Wachtell, Lipton, Rosen & Katz, who sat down with The Deal's editor in chief Robert Teitelman to discuss the state of M&A. Speaking Wednesday afternoon, Apollo's Leon Black commented that "there's no question that this summer the world changed for private equity" as the credit markets that allowed "private equity to go from being 3% of the M&A market to 35% in 2007 shut down for doing highly leveraged deals."
Although the credit markets have tightened, he doesn't think it will stay that way. "I think it's going to take three to six months for the mis-priced financing to clear out. Banks have to go through this wrenching period before they'll be ready to come back and start financing deals again," Black speculated. "We've been through this before; history has taught us there is no institutional memory. "Usually there's a six to nine month lag between credit crunch and prices coming down. The $64,000 question is whether there will be a recession to go along with it," he added. "There were four factors that allowed private equity to grow to such a crescendo," said Black. "The first was Sarbanes-Oxley, as a lot of CEOs didn't want to be in that regulatory fishbowl. Secondly, more and more of Wall Street was more unforgiving. Thirdly was the greed factor, as CEOs realized they could make more money with private equity, and lastly the easy financing terms." "The first three factors are still in place, and the fourth — financing — will eventually be back." While Black doesn't "relish the idea of being public" due to the publicity and scrutiny that goes with it, there are some real benefits to have stock as a currency. "It's the right long-term move, but there are trade-offs," he said. — George White Categories Deal Video
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