FIRST ROUND

A flurry of excitement rippled through PEI's offices at the back end of last year as some of the usual LBO suspects announced they had clubbed together to buy Warsaw-based orthopedic products firm Biomet. After all, at $10.9 billion (€8.3 billion), was this not the largest buyout seen to date in Central and Eastern Europe?

Well, no, as it turned out, it wasn't. In fact, far from being based in the capital of Poland (population 1.8 million) amid the towering skyscrapers of that city's burgeoning financial district, Biomet is headquartered in Warsaw, Indiana (population 12,000), in the heart of the lake-dotted agricultural lands of Kosciusko County.

Any temptation to view the Indiana version as a relatively humble locale should be resisted, though. According to the “Warsaw trivia” section of the Warsaw city government website, the town is in fact grandly known as the ‘Orthopedic Capital of the World’. The tag recognises the achievements of one Revra DePuy (1860-1921), a Warsaw resident who set out to make wooden splints and ended up establishing the world's first commercial manufacturer of orthopedic appliances.

The same website stresses that Warsaw, Indiana has other claims to fame beyond the field of orthopedics. For example, Little Crow Foods, a local company founded in 1903, reportedly introduced the first flavoured hot cereal to the world. In addition, resident businessman Stanley H Arnolt II (1907-1963) is described as a “dynamic industrialist” who was responsible for a number of automotive and marine-related inventions.

Not perhaps the deal we thought it was: but PEI is now sufficiently briefed to know that Biomet is part of a proud history of innovation in the smaller Warsaw. What's more, the firm's buyout is almost certainly the largest ever completed in Kosciusko County.

QUOTABLE
“I have a pretty good record of not being wrong too often.”

Ted Forstmann, head of private equity firm Forstmann Little, in a New York Times profile on the firm's stewardship of talent management company IMG. Forstmann Little, once one of the world's largest and most successful investment shops, is in wind-down mode following two disastrous telecom investments.

“American capitalism used to be General Motors and Ford and IBM. Now it's Blackstone and Texas Pacific Group and KKR and Carlyle because we're doing so many things to move the economy.”

David Rubenstein of The Carlyle Group, in an interview with Fortune.

“We don't believe there is a bubble. In 1987, the average deal was 93 percent debt and 7 percent equity. In 2006, the average deal had 33 percent equity and 67 percent debt. Given that the average company in the S&P 500 is now eight times the size of 20 years ago, that means 32 times the amount of equity of the old days to do a comparable deal.”

Another US LBO legend, KKR co-founder George Roberts, does the maths on today's deal structures during a conversation with The Wall Street Journal.