Buyout boom not over yet

NEW YORK – Wall Street seemed almost ready to say goodbye to the big buyout boom of 2007. Just a week ago, some analysts were questioning whether private equity firms could survive a trifecta of problems. Bond market turbulence seemed to be curbing enthusiasm for debt sales used to fund deals, while lawmakers in Washington were looking to raise taxes for the industry.

Such speculation now seems quite unfounded. This past week, Blackstone’s Stephen Schwarzman secured a $26 billion acquisition of Hilton Hotels Corp., and KKR & Co. LLP’s Henry Kravis unveiled a $1.25 billion plan to go public. Apollo Management’s Leon Black was said to be in talks with Abu Dhabi about a minority stake ahead of a potential initial public offering.

Relatively low interest rates and the availability of easy credit from lenders fueled the surge in leveraged buyouts the past two years. Massive amounts of untapped liquidity have helped buyout shops orchestrate bigger and broader deals. During the first half of this year, private equity accounted for 34 percent of the overall $1 trillion in U.S. acquisition activity, according to deal tracker Dealogic.

That didn’t slow this past week when Blackstone offered a near 40 percent premium to Hilton’s shareholders. And Providence Equity Partners led a $48.8 billion takeover offer for Bell Canada – a deal that could go down as the largest leveraged buyout in history.