Lookback: Ten Years After

For PE-backed buyouts, 1996 was quite a year. More deals worth $1 billion or more closed in the first nine months of that year than in the previous five years combined. There were seven of them, together worth over $10 billion.

My, how the asset class has grown. Fast forward 10 years and you’ll see that deal total for this year through the first three quarters stands at $181 billion. In the third quarter alone Buyouts tracked 12 deals worth more than $1 billion and 48 so far this year.

This year will also could go down as the year in which the buyout of RJR Nabisco was at last eclipsed as the largest private equity deal ever. Bain Capital, Kohlberg Kravis Roberts and Merrill Lynch Global Private Equity are currently on track to delist hospital operator HCA Inc. in a deal valued at $33 billion.

Other outsized announced LBOs so far this year include the $22 billion planned takeout of Kinder Morgan Inc. and the $10.58 billion carve out of Royal Philips Electronics’ semiconductors business.

Looking back a decade, the largest deal closed through Oct. 1 of 1996 was the $2.3 billion purchase of Riverwood International Corp. by the team of Clayton Dubilier & Rice, 1818 Fund II and Exor Group. Other “blockbusters” of that earlier era included the $1.8 billion purchase of AT&T Capital Corp. by GRS Holding Co. and Babcock & Brown; the $1 billion KKR buyout of Spalding & Evenflo; and the $1.3 billion purchase of AMF Group by GS Capital Partners and The Blackstone Group.

GPs reading this magazine today will be comforted to know that today’s overcrowded marketplace where good deals are hard to find is at least a phenomenon that is ten years old, and not, as so many claim, something that’s happened just in the last few years. Peter Weinberg, a partner at Goldman Sachs at the time, told Buyouts in 1996, “There are no available cheap cash cows with easy exits down the road. That was the ’80s model.”