Today’s top news is that a tentative agreement has been reached by the feuding Hatfields, McCoys, Dimons, Fulds, Langones and every other party involved in the Home Depot Supply sale. The original $10.3 billion price-tag has been knocked to $8.5 billion, with Home Depot expected to retain a 12.5% position. Three quick reactions:
1. The big lesson here is simply a confirmation of what I wrote last Friday: These deals will invariably close, because each of the three factions – buyers, sellers and bankers – has intractable incentives. The only foreseeable exception will be when outside regulatory bodies intervene.
2. The final leverage terms are unknown as of this writing, but they could certainly be used as a template for: (1) Other mega-deals in limbo and (2) The next generation of mega-deals.
3. The idea of a big-name seller slashing its sale price makes me (once again) wonder about a different kind of reduction: Buyout fund size cuts. We saw plenty of this in the venture capital world after the dotcom bubble burst – largely at the behest of limited partners. I haven’t yet heard LPs say to expect a similar buyout trend, unless certain firms do so in order to “reset” lousy vintages. Top reason? Too much ego. Ok, but VCs also had pretty big heads circa 1999, and a few lean months can really do some deflating…