Fear of financial “Armageddon” is starving private equity of fresh funds, one investor warned on Thursday, after the collapse of the $41bn takeover of Canada’s BCE telecoms group marked a low for the industry.
The BCE deal would have been the world’s largest leveraged buy-out when it was announced in June 2007. Its collapse underlines how severely conditions have turned against private equity in the past 18 months.
The credit crunch has prompted banks to stop providing loans for buy-outs -– the lifeblood of private equity -– while market turmoil has made many investors incapable or unwilling to supply the cash needed for the equity portion of buy-outs.
“As long as we are considering an Armageddon type of scenario, our hands are going to be tied for new funding in private equity,” Mark Boyle, head of private equity at the $140bn investment arm of Northwestern Mutual Life Insurance, told a conference on Thursday in London. “This environment has investment professionals so rattled they are thinking the unthinkable.”
Emphasis added by me.
These are the money professionals.
They see Doom.
Catching on yet?