Greetings from The Roosevelt Hotel in New York, where the 20th Annual Buyouts East conference has just kicked off. My goal is to do some live-blogging, beginning with a keynote from Alison Maas, co-head of financial sponsors for Goldman Sachs. That will begin in about 20 minutes.
In the meantime, I’m going to do some prep work for my on-stage interview tomorrow with Carl Icahn…
* Good to see Alison here. More fun than being at Goldman HQ, where lots of pink slips might be handed out before end-of-day.
* She just took the stage, and led as I figured she would: “I’m still bullish on the private equity industry… The private equity market has experience navigated through troubled markets.”
* I wonder if she’d be less bullish if she worked somewhere other than Goldman…
* Last year, she got a client call about an $8 billion LBO. She callled the CFO of Goldman, who asked if the $8 billion was the transaction amount, or the size of the equity check. My, how times have changed…
* She’s stressing the cyclical nature of private equity, which includes deal-making, fundraising, leverage availability, returns, etc. But here’s my question: How does that square with firms like Bain, First Reserve and Silver Lake raising the largest funds of their existence. If it’s cyclical, shouldn’t the fund sizes decline?
* Thinks defaults will be mitigated by two factors: (A) High level of equity in deals, which has been 30-35% over the past decade. (2) Dramatic loosening of debt covenants. In other words, companies can keep adding leverage. I keep hearing this latter explanation, but it’s a VERY slippery slope.
* Banks are now 40% through the new debt issue pipeline that existed at the end of August.
* Who will replace the CLO funds, which were the primary buyer of syndicated loans? Will it be the CLO funds htemselves, once they recover from their shell-shock? No formal answer here from Maas, although she thinks the banks will return first.
* She brings up the issue of recession, but doesn’t give an opinion on if we’re heading for one — or if we’re already in one.
* In 2008, average leverage multiples are 5x.
* Expects PE firms to increase their platform diversification. This includes geographic expansion and the addition of CLO, distressed, real estate, hedge, venture, etc.
* I asked aboyt the fundraising/cycle discrepency: She suggests that firms want to be ready for opportunity, and that this is partially a result of flight to quality. She also feels that the “big” firms might take this opportunity to increase market share.
* Question I should have asked: How does she feel about Tony James’ comments in Munich about disintermediating the banks…
* Oh good, someone asked: Doesn’t seem too worried, in part because firms like Goldman have large sales forces. Not quite sure what the barrier to entry is there if you’re willing to spend $$ and have deep networks — not sure there is much of one.
* Alison is done — moving onto an LP panel.