This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The LBO Puncture Wound

The last thing private equity firms would seem to need these days is some coaxing from Wall Street investment banks to pull off another super-sized leveraged buyout.

Buyout firms are having no trouble raising money from institutional investors and tapping the bond market to finance their acquisitions. If anything, the biggest problem for private equity firms is finding an enticing company to buy, not putting together the cash and debt to pay for a deal.

Yet that's not stopping investment bankers from pushing companies into so-called stapled financing deals -- prepackaged debt offerings that are often used to stoke the interest of reluctant buyout firms. Not surprisingly, the investment bankers recommending this strategy to their merger clients are often the same ones putting these stapled financing deals together and then peddling them to the buyout crowd.

Stapled financing is something bankers dreamed up four years ago when the merger market was moribund and buyout firms had a hard time lining up financing for a transaction. The bankers argue that these ready-made packages of bonds and loans are a good way of showing buyout firms just how easy it is to get financing for a deal.

But stapled financing presents an obvious conflict of interest for Wall Street bankers. It's never a good policy for an investment bank that's advising a company on a takeover to get too chummy with any of the potential buyers. Still, stapled financing was seen as a necessary evil given the difficult environment for LBOs at the beginning of the decade.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
OPEN $102.95 -0.02%
CCU $21.99 0.00%
C $54.87 0.00%
CS $26.37 0.00%
DB $30.86 0.00%

Markets

DOW 18,162.99 +121.45 0.67%
S&P 500 2,123.48 +19.28 0.92%
NASDAQ 5,106.5930 +73.8420 1.47%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs