Friday, July 20, 2007

Private Equity

George Anders writes about private equity firms like KKR and Blackstone in the WSJ, 18 July. He notes they are now going public. "So what changed? ... Cynics suggest that it's mostly about market timing, exploiting the current bull market to fetch hefty valuations".

Count me a cynic. I wouldn't touch any of these offerings. Let the Communist Chinese buy them. What was private equity about? Capital market inefficiencies. The lenders did not charge sufficiently high interest rates to compensate them for the risks assumed to finance the companies purchased by private equity firms. I remember Booz Allen's going public in 1970 and going private in 1976 for 32% of its 1970 IPO price. In 1970 I was a believer, not now.

1 comment:

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