Private Equity in The 2000s - The Third Private Equity Boom and The Golden Age of Private Equity (2003–2007) - Age of The Mega-buyout

Age of The Mega-buyout

As 2005 ended and 2006 began, new "largest buyout" records were set and surpassed several times with nine of the top ten buyouts at the end of 2007 having been announced in an 18-month window from the beginning of 2006 through the middle of 2007. Additionally, the buyout boom was not limited to the United States as industrialized countries in Europe and the Asia-Pacific region also saw new records set. In 2006, private equity firms bought 654 U.S. companies for $375 billion, representing 18 times the level of transactions closed in 2003. Additionally, U.S. based private equity firms raised $215.4 billion in investor commitments to 322 funds, surpassing the previous record set in 2000 by 22% and 33% higher than the 2005 fundraising total. However, venture capital funds, which were responsible for much of the fundraising volume in 2000 (the height of the dot-com bubble), raised only $25.1 billion in 2006, a 2% percent decline from 2005 and a significant decline from its peak. The following year, despite the onset of turmoil in the credit markets in the summer, saw yet another record year of fundraising with $302 billion of investor commitments to 415 funds.

  • Georgia-Pacific Corp, 2005
In December 2005, Koch Industries, a privately owned company controlled by Charles G. Koch and David H. Koch, acquired pulp and paper producer Georgia-Pacific for $21 billion. The acquisition marked the first buyout in excess of $20 billion and largest buyout overall since RJR Nabisco and pushed Koch Industries ahead of Cargill as the largest privately held company in the US, based on revenue.
  • Albertson's, 2006
Albertson's accepted a $15.9 billion takeover offer ($9.8 billion in cash and stock and the assumption of $6.1 billion in debt) from SuperValu to buy most Albertson's grocery operations. The drugstore chain CVS Caremark acquired 700 stand-alone Sav-On and Osco pharmacies and a distribution center, and a group including Cerberus Capital Management and the Kimco Realty Corporation acquired some 655 underperforming grocery stores and a number of distribution centers.
  • Equity Office Properties, 2006 – Blackstone Group completes the $37.7 billion acquisition of one of the largest owners of commercial office properties in the US. At the time of its announcement, the Equity Office buyout became the largest in history, surpassing the buyout of HCA. It would later be surpassed by the buyouts of TXU and BCE (announced but as of the end of the first quarter of 2008 not yet completed).
  • Freescale Semiconductor, 2006
A consortium led by the Blackstone Group and including the Carlyle Group, Permira and the TPG Capital completed the $17.6 billion takeover of the semiconductor company. At the time of its announcement, Freescale would be the largest leveraged buyout of a technology company ever, surpassing the 2005 buyout of SunGard.
  • GMAC, 2006
General Motors sold a 51% majority stake in its financing arm, GMAC Financial Services to a consortium led by Cerberus Capital Management, valuing the company at $16.8 billion. Separately, General Motors sold a 78% stake in GMAC Commercial Holding Corporation, renamed Capmark Financial Group, its real estate venture, to a group of investors headed by Kohlberg Kravis Roberts and Goldman Sachs Capital Partners in a $1.5 billion deal. In June 2008, GMAC completed a $60 billion refinancing aimed at improving the liquidity of its struggling mortgage subsidiary, Residential Capital (ResCap) including $1.4 billion of additional equity contributions from the parent and Cerberus.
  • HCA, 2006
Kohlberg Kravis Roberts and Bain Capital, together with Merrill Lynch and the Frist family (which had founded the company) completed a $31.6 billion acquisition of the hospital company, 17 years after it was taken private for the first time in a management buyout. At the time of its announcement, the HCA buyout would be the first of several to set new records for the largest buyout, eclipsing the 1989 buyout of RJR Nabisco. It would later be surpassed by the buyouts of Equity Office Properties, TXU and BCE (announced but as of the end of the first quarter of 2008 not yet completed).
  • Kinder Morgan, 2006
A consortium of private equity firms including Goldman Sachs Capital Partners, Carlyle Group and Riverstone Holdings completed a $27.5 billion (including assumed debt) acquisition of one of the largest pipeline operators in the US. The buyout was backed by Richard Kinder, the company's co-founder and a former president of Enron.
  • Harrah's Entertainment, 2006
Apollo Global Management and TPG Capital completed the $27.39 billion (including purchase of the outstanding equity for $16.7 billion and assumption of $10.7 billion of outstanding debt) acquisition of the gaming company.
  • TDC A/S, 2006
The Danish phone company was acquired by Kohlberg Kravis Roberts, Apax Partners, Providence Equity Partners and Permira for €12.2 billion ($15.3 billion), which at the time made it the second largest European buyout in history.
  • Sabre Holdings, 2006
TPG Capital and Silver Lake Partners announced a deal to buy Sabre Holdings, which operates Travelocity, Sabre Travel Network and Sabre Airline Solutions, for approximately $4.3 billion in cash, plus the assumption of $550 million in debt. Earlier in the year, Blackstone acquired Sabre's chief competitor Travelport.
  • Travelport, 2006
Travelport, which owns Worldspan and Galileo as well as approximately 48% of Orbitz Worldwide was acquired from Cendant by The Blackstone Group, One Equity Partners and Technology Crossover Ventures in a deal valued at $4.3 billion. The sale of Travelport followed the spin-offs of Cendant's real estate and hospitality businesses, Realogy Corporation and Wyndham Worldwide Corporation, respectively, in July 2006. Later in the year, TPG and Silver Lake would acquire Travelport's chief competitor Sabre Holdings.
  • Alliance Boots, 2007
Kohlberg Kravis Roberts and Stefano Pessina, the company’s deputy chairman and largest shareholder, acquired the UK drug store retailer for £12.4 billion ($24.8 billion) including assumed debt, after increasing their bid more than 40% amidst intense competition from Terra Firma Capital Partners and Wellcome Trust. The buyout came only a year after the merger of Boots Group plc (Boots the Chemist), and Alliance UniChem plc.
  • Biomet, 2007
The Blackstone Group, Kohlberg Kravis Roberts, TPG Capital and Goldman Sachs Capital Partners acquired the medical devices company for $11.6 billion.
  • Chrysler, 2007
Cerberus Capital Management completed the $7.5 billion acquisition of 80.1% of the U.S. car manufacturer. Only $1.45 billion of proceeds were expected to be paid to Daimler and does not include nearly $600 million of cash Daimler agreed to invest in Chrysler. With the company struggling, Cerberus brought in former Home Depot CEO, Robert Nardelli as the new chief executive of Chrysler to execute a turnaround of the company.
  • First Data, 2007
Kohlberg Kravis Roberts and TPG Capital completed the $29 billion buyout of the credit and debit card payment processor and former parent of Western Union Michael Capellas, previously the CEO of MCI Communications and Compaq was named CEO of the privately held company.
  • TXU, 2007
An investor group led by KKR and TPG Capital and together with Goldman Sachs Capital Partners completed the $44.37 billion buyout of the regulated utility and power producer. The investor group had to work closely with ERCOT regulators to gain approval of the transaction but had significant experience with the regulators from their earlier buyout of Texas Genco.
  • BCE
On July 4, 2008, BCE announced that a final agreement had been reached on the terms of the purchase, with all financing in place, and Michael Sabia left BCE, with George Cope assuming the position of CEO on July 11. The deal's final closing date was scheduled for December 11, 2008. With a value of $51.7 billion (Canadian). The company failed a solvency test by KPMG that was required for the merger to take place. The deal was canceled when the results of the test were released.

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