NEW YORK (Reuters) – Private equity investor Christopher Flowers, fresh from a deal to buy failed U.S. mortgage lender IndyMac, is on the hunt for more failing banks to acquire with the help of the government.
The ex-Goldman Sachs banker who runs New York-based private equity firm J.C. Flowers & Co said on Friday his firm was focusing on striking more government-assisted deals for banks, as well as for businesses being sold by large financial institutions and other companies.
Another area of interest is financial services companies trading at a discount to their cash. Such companies were mostly in the insurance sector, Flowers said.
Flowers spoke to students at a private equity conference at Columbia University. His talk was off the record, but Flowers later allowed Reuters to use some of his comments.
Flowers has made his name investing in financial assets. But the economic crisis has made it hard to do deals in the financial services sector as credit remains scarce and would-be buyers worry about the quality of assets on the target’s books.
Flowers’ firm also has had its share of troubles with investments due to the crisis.
In 2007 it was among a group of investors who tried to buy SLM Corp (SLM.N), the student lender known as Sallie Mae, for $25 billion, in a deal that ended up cratering.
Flowers also has a 25 percent stake in stricken German lender Hypo Real Estate (HRXG.DE). Sources have told Reuters the government may break up Hypo Real Estate and set up a bad bank to hold its problem loans. Flowers has put in 1.1 billion euros ($1.4 billion) into the lender.
A focus on assisted transactions can reduce risk. Government-assisted transactions for troubled institutions and deals for subsidiaries from large corporations desperate to sell noncore businesses can be struck such that buyers are protected from losses.
As part of the January deal for IndyMac, private investors including Flowers entered into a loss-sharing agreement with the Federal Deposit Insurance Corp.
Additional banks are expected to run into trouble in the United States and around the globe, which could present opportunities for more of these deals.
Flowers is well-positioned to capitalize. He got approval in August to personally buy a small bank in Missouri that has about $14 million assets, allowing him to avoid his firm being classified as a bank holding company.
He can use that purchase as a base from which to acquire other banks.
(Reporting by Megan Davies and Paritosh Bansal; Editing by Xavier Briand)