Strategy First… and Second… and Third
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Tuesday’s Wall Street Journal had an article about how poorly large private equity deals have performed.  No wonder. What value do they bring to the company? Stripping off and selling key assets, re- re-leveraging the balance sheet.  How does this financial engineering grow or improve a company?
Well, maybe some financial discipline is needed. But I stand by my philosophy of Strategy First - why are you buying the company in the first place and what are you going to do with it? Seems to me with all these poorly performing PE deals, it is time for strategic companies to step in, buy them back and grow them.
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May 25th, 2010 at 10:32 am
A recent article in Dealbook (”Behind the Trends in an M&A Uptick”) discussed how many of the current pe deals are “must dos” as opposed to “game changers”. The deals between Continental and United as well as the disagreement between Avis Budget Group and Hertz Global Holdings over Dollar Thrifty Automotive Group are representative of troubled industries where consolidation is a must. PE groups lurk around “must do” transactions and therefore will act where strategic buyers remain hesitant. It seems that the industry is returning to the old norms where private equity buyers cannot outbid strategic buyers because of cost-savings and synergies the strategic buyer can reap. Ultimately, this means that the big deals will be in strategic areas by players that must do deals or are consolidating (technology and pharmaceutical industries will most likely be leaders).