After spending most of 2008 watching banks twist in the wind, deep-pocketed private equity firms may finally be preparing to wade into the fray following the $700 billion bailout. Speaking at the Super Return Middle East conference in Dubai this week, private equity heavy weights Stephen Schwarzman, David Rubenstein and Henry Kravis indicated that the U.S. government's actions could be the trigger that lures buyout shops into banking investments, according to a Bloomberg
report.
While banks would surely welcome the billions that LBO firms have under
management, private equity firms are sure to be very cautious should
they venture into the banks, which has proved to be a minefield for firms that jumped in earlier. TPG Capital saw investment in
Washington Mutual Inc. wiped out in only months after a run on the thrift
resulted in its seizure and acquisition by J.P. Morgan Chase & Co. at a
fire-sale price.
Additionally regulations about bank ownership remains a
thorny issue for buyout shops, who wouldn't be able to exercise full
control over an investment without becoming a bank holding company
themselves. The heads' of Blackstone Group LP, Carlyle Group and Kohlberg Kravis Roberts & Co. were
also measured in their comments about how much money could go into
banks, saying that the U.S. plan could lead to investments of tens of
millions dollars, not the $20 billion-plus deals that capped the
leveraged-buyout boom of 2006-2007, Bloomberg notes.
- George White
See Bloomberg story
