The circling of Boots and Sainsbury's by some of the UK buyout jungle's big beasts tells us at least a couple of things. First, that prising companies off the London Stock Exchange is not getting any easier: both targets appear to be putting up solid defences. Second, that these are still rip-roaring times for private equity. Sources canvassed by PEI offered the opinion that, however hard they fight, even these two iconic retailers may find it hard ultimately to evade the predators' jaws – particularly Boots, whose largest shareholder has teamed with KKR to take the business off the market. Displaying a price tag of around £10 billion ($19 billion), either one would represent Europe's largest buyout to date.
So, the big buyout boom steamrollers on? Well yes: and things are likely to continue that way for as long as sponsors can retain the support of the debt markets and the limited partner community. Fortunately, at the current time, the largest investor groups appear to have few reservations about the viability of mega-LBO strategies (or, at least, the best of breed in this category). Consider the words of CalPERS' head of alternatives Leon Shaninian in our interview with him on page 58 (part of this month's Fundraising Special, which commences on page 49): “A lot of people say, boy, these funds have just become too big. That's not necessarily our view. These firms have incredibly talented investment professionals that have been through multiple cycles and have in some cases extraordinary vision and discipline.”
Yet despite such warm sentiments, everyone associated with private equity at the current time will be well aware that some rather less flattering comments have been directed at the asset class – especially at those GPs targeting firms with vivid profiles and large payrolls. Europe (the UK in particular) has been at the centre of a storm whipped up by those who see private equity as a threat to jobs and long-term economic stability. But make no mistake: this debate is going global. Pressure for action from G8 nations is being applied by union leaders around the world. In the US, meanwhile, a Congressional hearing will probe private equity's credentials (see page 24).
The vital question at this point is can private equity win the arguments? Yes, by focusing on specifics, says Simon Witney (page 10) rather than dealing in the broad generalisations bandied about by some industry opponents. If they looked hard enough, he implies, the critics might find that many of their concerns have already been addressed. Perhaps a few lessons can also be learned from the example of France (see page 60), where private equity seems to have established a relatively harmonious relationship with stakeholders of all stripes (so far at least).
One thing for sure, the debates will continue to rage. Buoyant and beleaguered: the curious contradiction that is private equity in these times of high drama.
Enjoy the issue,
Andy ThomsonCommissioning Editor