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At The Deal's M&A Outlook 2009 conference Tuesday morning, Martin Mannion, a managing director at Summit Partners, spoke about the reluctance of owners to face the music when it comes to write-downs. "We have a Hobbesian choice," Mannion commented. "A lot of people
aren't taking the pain. In the industry as a whole, if we took our
medicine, it might be for the best.
"There's a lot of folks out there that are saying I don't have to take
the pain yet because the capital structure on our deals is so stable,
we can wait it out seven years," Mannion said. "Buyout guys tend to be optimistic, and
sometimes they don't take their pain fast enough.
"We don't see the sellers capitulating at all," he said. "They're still not willing to come down on the prices." Nor does he expect write-downs to be the only source of grief for private equity firms. "I think there's going to be fairly large shrinkage in our industry because a lot of firms aren't going to be raising new funds." Looking to the future, Mannion said that "Obama doesn't have many options right now. In the first 12 to 24 months, they're going to be trying to stimulate the economy. After that he'll be trying to keep some of his promises and try to cut the deficit. But when you flood the market with capital [as is happening now], you eventually get inflation. We think that in two to three years there's going to be rampant inflation. "With our portfolio we're really focused on expenses," Mannion continued. "We're telling all our companies to plan for no revenue growth, which might end up being optimistic. We're trying to position our companies for the current environment, and I think there's going to be some great opportunities for our portfolio companies to make acquisitions in the future. - George White See all M&A Outlook 2009 posts
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