United States of America (Press Release) March 14, 2008 -- (Excerpts from Private Equity Interview with Hasit Vibhakar)
Most would think that without credit, the private equity market has dried up. Right? That is certainly the accepted wisdom. Hasit Vibhakar managing director of a private equity firm with over $ 375 million under management and two emerging market funds closed discusses the credit markets and middle market space.
Hasit Vibhakar goes on to discuss how being lost in the headlines about the paucity of big buy outs is that deal making has continued at a healthy pace in the middle market. Our firm only deals with middle market companies. We love middle market companies. Hasit Vibhakar explained that for deals under $ 250 million (our specialty), deal announcements peaked in October, well after the credit markets had cracked, and the average monthly value of announced deals from July through this January was only 15% below average in the booming first half of 2007. The average number of deals per month was down less than 7% in the second span.
Hasit Vibhakar went on to state, “If you are looking for debt financing, $ 25 to $ 200 million, you can get it.” We have a third new fund (not closed out yet) just for middle market companies. Of course it costs more now due to the credit markets, but access to capital is available. We noticed a slowdown between transaction of $ 250 million and $1 billion which is not our specialty anyways. Some of the larger PE firms that we partner with dealing in the $ 250 million to $ 1 billion space did anticipate a slowdown. But even in this space $ 3.6 billion of deals have been announced each month, on average since July which is down only 36% from the first half. Hasit Vibhakar states that this is hardly a collapse like the disappearance of mega buyouts. Only 12 LBO’s greater then $1 billion have been announced since July, and the 3 deals this January were worth a combined $3.8 billion compared with the 13 buyouts worth $107 billion announced last May.
Hasit Vibhakar explains that middle market buyout firms seem to be having no problem raising funds. In addition Hasit Vibhakar discusses how 90% of their firms investing is global, very little domestic participation so credit evaluation is not an issue. Hasit Vibhakar explains that if the economy slows down, that will simply create more opportunities in our middle market space in our target markets and regions.
