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A panel of dealmakers discussed the landscape for private equity investment in the banking industry at The Deal's M&A Outlook 2009 conference Wednesday afternoon. Moderated by Vipal Monga, a senior writer at The Deal, the panel included David Solomon, the co-CEO of Lazard Middle Market LLC; Clifford V. Brokaw, a managing director at Corsair Capital LLC; Lee Meyerson, a partner at Simpson Thatcher & Bartlett LLP; and Andrew M. Senchak, the vice chairman and president of Keefe Bruyette & Woods Inc.
 Meyerson commented that "the $250 billion that's gone into the
banking industry is only about half of what the industry needs. There's
going to be a need for more capital to go into the industry."Other panelists agreed. "The amount of capital going into these institutions is going to be way beyond what anyone thought it would be six months or even three weeks ago," Senchak added. With the banking industry having already tapped most sources of new capital, deep-pocketed private equity firms are one of the last remaining places for them to tap for new capital. "There will be a lot of opportunities in the banking space," Corsair's Brokaw said. "Valuations are very attractive. You'll see banks divesting businesses, so there'll be opportunities for private equity to buy those business. But you'll see private equity being very cautious going forward." In spite of the opportunities Lazard's Solomon saw some reasons for caution. "As banks begin to deleverage, return on equity could come down," he said. "I think there's a short-term opportunity for private equity. The real question is whether there is a long-term opportunity for private equity as return on equity falls." Senchak agreed, saying, "The issues with some of the banking companies are pretty dire. It's a useful thing that Treasury said it wants to encourage private equity to come in along with TARP money." However, regulation of the banking industry has made private equity investment in banks difficult. Speaking to that point, Meyerson commented, "I don't see the Fed rapidly changing the rules [on private equity ownership of banks]. However, one thing the Fed did that is subtle but significant is raising the amount of capital that could be invested to one-third of the total equity." - George White See all M&A Outlook 2009 posts Categories Deal Video
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