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Financial Times: Focus on buy-out scale

By Peter Smith and Angela Maier in Frankfurt
Published: February 28 2007 02:00 | Last updated: February 28 2007 02:00

David Bonderman, founder of Texas Pacific Group, kicked off the private equity industry’s Super Return conference yesterday with adeclaration that the sector had now reached the scale to target the largest global companies.

“There have been more public to private [deals] in the last 18 months than in the previous 18 years,”Mr Bonderman told delegates at the event in Frankfurt.

The comments came a day after TXU, the Texas-based energy group, agreed to a $45bn takeover including debt, by TPG group and KKR, the largest buy-out in history.

In an apparent game of one-upmanship, Steve Schwarzman, chief executive of rival private equity firm Blackstone, said meanwhile that it had run the slide rule over a $50bn German company.

“But the stock went up too much and it didn’t work,” Mr Schwarzman said on the fringes of Super Return.

BASF, Bayer and Volkswagen all have enterprise values that fit that bill. And late in the summer of 2006, Continental, the automotive equipment group, confirmed that unnamed private equity funds had attempted a takeover of the company.

But Mr Bonderman also sought to play down the power of the private equity industry, in an apparent response to the trade union and political backlash against buy-outs.

He said the global private equity industry’s size was little more than a “rounding error” when compared to the $70,000bn enterprise value of global equity markets.

The total amount of purchasing power of private equity including leverage of $1,200bn was less than the total enterprise value offive large public companies – Siemens, Shell, Microsoft, Toyota and General Electric – which had an aggregate value of $1,600bn, he said.

The strength of opinion against the industry seemed muted at yesterday’s conference. A union protest outside was attended by less than a dozen people.

A union campaign in the UK has recently triggered a wide-ranging debate into the role of the private equity industry.

Tony Blair, the UK prime minister, yesterday saidprivate equity brought “alot of benefits” to the economy.

Mr Bonderman said: “We recognise there is xenophobia but private equity should more or less follow GDP.”

He said large German groups had laid off 100,000 people in the past two years, compared to 7,000 by those owned by private equity.

Copyright The Financial Times Limited 2007


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