Happy Friday, all. As LPs, GPs, and advisors gathered in Germany for the SuperReturn conference this week, the state of private equity was naturally debated. On one hand, the booming activity and newsworthy mega-deals have started the year off on a great foot. On the other, the excessive use of cheap capital is possibly sending M&A down a dangerous path.
In other news: Richard Schulze has finally ended talks to buy Best Buy, Groupon’s CEO was fired, and mezzanine shops are looking for new ways to invest as the favorable environment for traditional debt undercuts their value add.
Takeaways from SuperReturn…
What the Private Equity Industry Thinks: While at SuperReturn, hundreds of private equity professionals participated in a poll assessing the state of the industry. Questions include choice geographies, when the peak of the current cycle will occur, and more.
Private Equity Players See Signs of Excess in Buyout Market: With cheap debt, surging equity markets, and a confidence boost from recent mega-deals, dealmakers are jumping at the opportunity to close huge transactions. Although some recognize the long-term risks, they just can’t stop.
The Economist echoed the fruitless efforts of senior buyout professionals to “warn about the mesmerising allure of cheap money.”
In the Hunt for Capital, Private Equity Executives Outnumber Investors: If you’re planning to fundraise in the next few months, expect an uphill battle. The conversation around SuperReturn’s (very expensive) water coolers is that LPs are investing less capital in fewer GPs.
In other news…
Best Buy’s Talks With Its Founder Said to Have Ended: It was announced this morning that Richard Schulze’s efforts to buy back Best Buy have ended. Maybe he didn’t want the deal to be forever known as the “take-private that happened after the Dell one.”
The Twitter IPO is Even Bigger Than You Think: Twitter, along with Facebook, Zynga, and Groupon, helped “spark a startup renaissance.” After the underwhelming IPOs from the other three, Twitter’s eventual IPO may dictate the future of consumer internet IPOs.
JPMorgan #1 Investment Bank Amid a Flurry of New Deals: Investment banks have had a rough few years, and they have the scars to prove it. But, as M&A activity looks to surge this year, JPMorgan and other major banks hope, albeit cautiously, for a recovery.
Will J.C. Penney Survive?: According to Rafi Mohammed, J.C. Penney is experiencing a “financial Armageddon.” The solution is to create a better brand, not a better “Fair and Square Every Day” sale.
Mezzanine Debt Provider Look Beyond Buyouts: With cheap money and low interest rates, buyers are relying primarily on senior debt for their deals. To counter the diminishing interest, mezz providers are looking to deploy their capital in other investments.
Thanks to matteson.norman for the photo.