'Kick the Can' to be PE Lesson of 2009

November 24, 2008

If history is a guide, a deep, consumer-led recession could present private equity players and distressed funds with above-average rates of return on 2009 and 2010 acquisitions. What likely will make the coming cycle unique, however, is that an unprecedented number of deals will involve companies held in private equity portfolios.

“The LBO is really living up to its name: Large Bankruptcy Opportunity,” John Penn, a partner at Haynes and Boone LLP, and a former head of the American Bankruptcy Institute, told SNL.

“It’s almost like musical chairs, because the music is stopping and the debt is going to land in these peoples’ laps,” Penn said, noting that private equity firms will either have to restructure the troubled businesses on their books or sell them off at distressed prices to meet debt obligations. >>

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