Speaking at the recent IFR Conference Financing Leveraged Buyouts, Charles Sherwood of Permira, said: “There is an image of private equity as masters of a financial universe, but there is actually a large part of the market that has not been penetrated by LBOs. We are just nudging into the premiership, but nowhere near the top of the league. This has positive connotations that there is much further for the private equity industry to go.”
In 2006, it was a similar scenario. The largest European private equity deal was Macquarie’s €11.9bn acquisition of Thames Water, coming in at number 17.
Sherwood put the market into context comparing KKR’s mega US$31bn acquisition of RJR Nabisco in 1989, which represented 1.8% of market value of the S&P 500, which in today’s terms would mean it was a deal worth US$250bn.
The largest deals done to date are Blackstone’s acquisition of Equity Office Properties (US$38bn) in November 2006 and the US$44bn acquisition of TXU by KKR, TPG and others. However, relative to the S&P 500, TXU is less than a fifth the size of RJR Nabisco.
And so putting this into context it reveals that private equity is a significant force, but needs to be seen in the context of a much broader capital market.