Were PE Firms Shunned in 2009?

In the deal world, perception is everything.

Last year, several banks became sellers as they looked to auction off asset management units to raise cash. But in certain cases, private equity firms weren’t invited. For example, consider Bank of America’s sale of Columbia Management Group.

BofA launched the auction of Columbia in the first quarter of 2009, but froze out private equity bidders due to concerns that LBO firms wouldn’t be able to find enough “L.”

“There were lots of PE firms that would’ve been interested [in Columbia] and the price was reasonable,” says a source familiar with the situation. “BofA’s view– rightly or wrongly– was that PE wouldn’t ever get there.”

After getting tepid bids, BofA ended up splitting the business. It kept Columbia’s short-term cash and money market portfolios, and sold Columbia’ long-term asset management unit to Ameriprise for roughly $1 billion.

But it took forever to get done. BofA originally wanted everything wrapped up by the end of Q2 2009, not even signing the sale agreements until September and not closing until last month.

By that point, the financing markets had strengthened and private equity firms were once again able to get leverage. But BofA was too far down the road with Ameriprise to include private equity. “Definitely there were some early miscalculations with Columbia,” our source said. “The financing markets came back a lot faster than people expected.”

BofA did not return calls or messages for comment.

Exception To The Rule?

Not surprisingly, several buyout pros bristled at the suggestion that last year’s dreary deal volume was caused by PE-specific inclusion.

Several private equity execs insist that last year’s lack of deal volume was caused by a dearth of deal-flow — not because they were being specifically excluded. “There just was not a lot going on last year, and a lot more this year,” one buyout pro said.

Another investor added: “2009 was much more about refinancing and doing portfolio add-on acquisitions.”