Cracking A Window On Portfolio Company Valuations
Interesting, isn't it, how LBO sponsors may put widely varying values on the companies they take private? The New York Times had an interesting exercise in its business section today to compare and contrast the valuations that different buyout firms put on some of their portfolio holdings. One example is the Texas electric utility Energy Future Holdings Corp., owned by buyout firms including Kohlberg Kravis Roberts & Co., TPG Capital and Goldman Sachs. The company was taken private in 2007 in a deal valued at $48 billion—the largest in the history of private equity. K.K.R. now values its investment at 20 cents on the dollar; TPG values its stake at twice that, 40 cents. That gap represents a difference of nearly $1.7 billion in the value of each firm’s equity stake. It almost makes you wonder if these sponsors were looking at the same company.
