Buyouts are back.
A panel of private equity fund managers at the Milken Institute Global Conference in Beverly Hills this week celebrated the comeback of highly leveraged corporate takeovers, which had ground almost to a halt during the financial crisis.
"What a difference a year makes," said Leon Black, head of Apollo Management in New York.
Black and the other buyout honchos attributed the return of debt-financed acquisitions to the recovery in the credit markets and the overall economy.
"The high-yield market is probably better today than it ever has been," said Scott Sperling, co-president of Thomas H. Lee Partners in Boston, referring to the junk bonds that finance many private equity transactions.
The problem now confronting private equity investors: The prices of target companies have shot up faster than fund managers have been able to scoop up bargains.
"A lot of the low-hanging fruit, frankly, is gone," Black said. "The snapback has been unbelievably dramatic."
The managers also bemoaned what Black called the "populist wave" helping to fuel the Obama administration's effort to boost oversight of the financial industry.
"You're seeing some wacky regulation, which makes running our business a lot more difficult," said Ted Virtue, chief executive of MidOcean Partners, which buys midsize companies.
Still, the private equity business has largely escaped the scrutiny aimed at other areas of Wall Street. The conference's panel discussion took place Tuesday as Goldman Sachs Group Inc. executives were being grilled at a marathon Senate hearing.
"I'm glad I'm not Goldman Sachs today," Black said with a wide smile.