I’ll be appearing on CNBC’s Fast Money later today, to discuss whether private equity firms will take advantage of new rules that make it easier for them to invest in banks. I’m not sure exactly when I’ll be on, except that it will be between 5pm-6pm ET. Seems they’ve changed their mind. Makes me sad, particularly because I would have had a cool Rocky Mountain backdrop here in Denver…
Still, my gut take on this is as follows:
- Private equity firms are very tempted to do bank and bank-like deals, because the financial services sector is considered at a nadir with lots of motivated sellers.
- Big private equity firms are further tempted to do such deals, because they want to expand their asset management platform beyond just alternative investments (this is particularly true of KKR).
- Limited partners are terrified of both #1 and #2, because they know only fools rush in. LPs look at the TPG/WaMu situation, and would rather it become an isolated incident rather than a trailblazer.
- #3 probably cancels out #1 and #2, although PE firms are certainly licking their lips over this proposed bailout plan. If something similar to the Paulson Plan goes through, expect to see a whole host of new funds dedicated to buying up the toxicity at 10 cents on the dollar, and then trying to work it out. This may include funds from existing firms — although they’d probably have to hire the ex-Lehman, Merrill, etc. guys who made the bad deals in the first place — or from dedicated spinout teams of ex-PE/ex-hedge pros.