The Buyout Boom

Private Equity firms are setting record deal sizes literally every month:

• Sep 2006, A PE group led by BlackStone tookover Freescale in a transaction valued at $17.7b.
• July 2006, $21.2b LBO of HCA by Bain, KKR and Merrill Lynch.
• Dec 2006, Apollo and Texas Pacific Group bought Harrah's for $17.1b.
• This week, BlackStone closed yet another record deal with Equity Office, for $22.3b.

Here is a list of deals in 2006. Also, there is an article (requires subscription) in today's Journey about Goldman Sachs gearing up its own $20b Private Equity fund. So who's next? By all measures, Microsoft seems to be a excellent LBO target: it's cash rich, almost debt free and has a stream of stable cash flows. It's share price has not been doing so well recently. Yeah, it's a bit too big. At today's stock price, Microsoft has a market cap of about $300b. If the LBO is 15% funded with equity, the PEs would need to put up some $45b in cash. But with more PE funds clearing the $20b watermark, nothing is impossible... Who is who in Private Equity.