The Private Equity Bandwagon

HOLY BUYOUT, BATMAN! The whisper on the Street is that Kohlberg Kravis Roberts was prepared to put up $50 billion to buy French entertainment and telecom company Vivendi. The talks didn't prove successful, but the fact that KKR could even consider a deal of that size means that the vast majority of publicly traded companies are now vulnerable to private equity raiders. An absolute avalanche of cash is chasing deals.

Through Oct. 31, capitalmarkets data provider Dealogic says there were 2,163 private equity buyouts globally valued at $538.67 billion. That's more than half a trillion dollars, for anyone who doesn't have a calculator handy, and is up from $291.63 billion for the same period last year.

Lest there be any doubt in your mind, some of the highprofile activists have scant regard for the sanctity of decision-making in the boardroom. Raider Carl Icahn said during a recent panel discussion: "The only thing more worthless than a CEO is a board member." The sentiment may be mutual. Let's see what Mr. Big Mouth can do at ImClone, now that he has seized control.

One of the latest prominent executives from a publicly traded company to defect to the dark side is Deryck Maughan, once a contender to lead Citigroup. He is now chairman of KKR Asia, an arm of KKR. "I'm now officially a barbarian," he quips.

Meanwhile, the Justice Department probe of private equity funds seems to be expanding, according to the Financial Times. The issue is whether private equity consortia, consisting of two or three firms, engage in "club deals" with other private equity groups in which they agree to step out of the bidding. The goal, of course, would be to avoid driving up the price of a target company. Presumably, the favor is repaid in some way. "It just seems that they are too polite in backing away from bidding wars," says one observer. "Other battles for control of a company go on for weeks or months, and there are multiple bids."