Private-equity firms will direct more funds toward listed companies as the market for leveraged buyouts (LBOs) shrinks because of the lack of bank financing, PAI Partner’s managing partner Lionel Zinsou said.
Investment firms will increasingly buy minority stakes in listed companies or even try to take them private, Zinsou said in an interview on Saturday at the Economic Forum of Aix-en-Provence, France.
“Private equity firms have raised hundreds of billions of dollars, so be prepared to see more and more of them invest in listed companies, even minority stakes, as long as the debt market is closed for leveraged buyouts,” Zinsou said. “Stocks are now poorly valued and opportunities arise.”
European private equity firms from PAI to Paris-based Wendel are building minority stakes in companies as a credit crunch dries up the LBO market and as stocks decline on a global economic slowdown.
Buyout firms announced US$103 billion of takeovers this year, about a third as much as in the same period last year, data compiled by Bloomberg shows.
Banks, reeling under billions of buyout debts, are more willing to fund purchases of minority stakes in listed stocks because they are liquid assets, Zinsou said.
Returns can be the same as LBOs, with the difference being that the firm doesn’t exert much influence over the company’s strategy. Private equity firms always try to get influence eventually, he said.
PAI Partners raised 5.4 billion euros (US$8.4 billion) in May for buyouts, twice as much as the 2.7 billion euros the firm raised in 2005. In all, firms raised US$163.5 billion in the first quarter.
Paris-based PAI Partners, which Zinsou joined last Tuesday after 12 years with French advisory bank Rothschild, said last month it has built an 18 percent stake in computer services company Atos Origins SA and gained two board seats. It said that while it may lift its stake further, it didn’t intend to take control of the company.
PAI wants to take part in Atos’s development, Zinsou said.
“We want to be the number one shareholder in Atos, supporting the management,” he said.
After months of battling with Atos’s management, hedge funds Centaurus Capital LP of the UK and Pardus Capital Management LP of the US, which jointly hold 20 percent of the computer services company, were granted board seats last month. They say the company needs a change in strategy.
The market for buyout debt should recover by the second half of next year, Zinsou said.
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