The primary downside is that debt-ridden buyouts ultimately prove fatal for companies, loading them 
with enormous debts that finally suck out their capital. Sample this: HCA, a big hospital operator in America, slipped three notches to B+ in Standard & Poor’s corporate credit ratings, also due to interest of $1.5 billion a year as bonus.
It makes sense to analyse the returns of listed PE firms at this juncture. The total return of S&P Listed PE Index as on July 5, 2007, was 221.4 points, a 30% appreciation y-o-y. But interestingly, there is a lingering scepticism in the market now regarding these stocks. Take KKR for instance. It got listed at $24.58 (in May 2007) & its share price as on July 6, 2007 has fallen to $22.2.
Then there’s the phenomenon of rising interest rates (currently at 5.25% in the US after 17 consecutive hikes), which will make raising valuations of target companies difficult. And as the risk appetite of these firms grows, they are liable to get even more ruthless in stripping assets & yet ending up as value destroyers. And like we said, where the wave ends, the bloodbath begins...
with enormous debts that finally suck out their capital. Sample this: HCA, a big hospital operator in America, slipped three notches to B+ in Standard & Poor’s corporate credit ratings, also due to interest of $1.5 billion a year as bonus.It makes sense to analyse the returns of listed PE firms at this juncture. The total return of S&P Listed PE Index as on July 5, 2007, was 221.4 points, a 30% appreciation y-o-y. But interestingly, there is a lingering scepticism in the market now regarding these stocks. Take KKR for instance. It got listed at $24.58 (in May 2007) & its share price as on July 6, 2007 has fallen to $22.2.
Then there’s the phenomenon of rising interest rates (currently at 5.25% in the US after 17 consecutive hikes), which will make raising valuations of target companies difficult. And as the risk appetite of these firms grows, they are liable to get even more ruthless in stripping assets & yet ending up as value destroyers. And like we said, where the wave ends, the bloodbath begins...
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Source: IIPM Editorial, 2006
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
Source: IIPM Editorial, 2006
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
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Strategic Alliance / Consulting / Intellectual Tic-up Partners Arindam chaudhuri GIDF Planman Consulting Business & Economy 4Ps Business & Marketing The Sunday Indian The Daily Indian Kkoooljobs.com
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