Let’s make a deal!

first_imgIn February, Kohlberg Kravis Roberts and the Texas Pacific Group led a group of investors that offered to acquire TXU, the Texas energy giant, in a deal valued at $45 billion, including assumed debt. That would be the largest buyout ever, eclipsing last year’s $39 billion acquisition of Equity Office Properties Trust. “There are no signs that commercial credit is tightening up,” said Filek of PricewaterhouseCoopers. He also suggested that recent declines in the stock market might have spurred deal activity by lowering the prices of takeover targets. Private equity buyers, which accounted for a fifth of all deals last year, have made the biggest deals so far this year, but blockbuster transactions between public companies may also be on the way. ABN Amro of the Netherlands and Barclays of Britain recently disclosed that they are in discussions to merge, a deal that analysts estimate could value ABN as high as $88 billion. If an agreement is reached, it could surpass the 1998 merger of Travelers and Citicorp as the largest financial services deal in history. Buyout firms, meanwhile, continue to outdo each other with new, record-breaking funds. Both the Blackstone Group and the private equity unit of Goldman Sachs are raising funds that could reach $20 billion or more, providing plenty of fuel for taking companies private.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! “We are still in an accelerating mode,” said Robert Filek, a partner in the transaction services group at the accounting firm PricewaterhouseCoopers. He added that transactions this year could break the record set in 2006, when there were about $3.8 trillion in announced deals – up 38 percent from 2005. Last year’s abundance helped produce an especially rich bonus season among bankers. But February and March brought a few harrowing swings in the stock markets and an implosion in the market for subprime mortgages, creating concern on Wall Street that corporate and financial buyers would pull back. There was special concern that a crisis in the credit markets would render deal-making more difficult for private equity firms, which usually borrow heavily to pay for their acquisitions. But rather than retreat, buyout firms have taken their deals and fundraising to new levels. After breaking the record for mergers and acquisitions last year, deal makers have started 2007 at an even faster pace. With the first quarter about to draw to a close, the value of corporate deals announced through Wednesday reached $1.08 trillion, according to Thomson Financial. That is 24 percent more than the value of deals in the first quarter of 2006. The tempo has slowed from last year’s fourth quarter, when $1.2 trillion in transactions were announced. But the deal cycle is seasonal, and the fourth quarter has been the busiest one for announcements in recent years – a trend that could partly reflect a desire by investment bankers to plump up their year-end bonuses. Many of the conditions favorable to deals remain in place, including an accommodating credit market and an abundance of well-financed private equity firms. last_img read more

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