From the WSJ ($) This is something closer to the natural order of the universe.
With deal-related financing markets in disarray, private-equity buyouts are being delayed around the world, giving corporate buyers an advantage over the cash-rich private-equity firms for the first time in years.
Consider Virgin Media Inc. The British cable-television operator is proceeding with an auction of the company after already having received this month a nearly $10 billion takeover approach from Washington private-equity firm Carlyle Group. That could benefit the cable-industry players exploring a bid, a list that includes Liberty Global Inc., Time Warner Cable Inc. and Comcast Corp.
Carlyle and a competing consortium of four private-equity firms will likely have trouble making a firm bid until credit markets calm and banks are able to sell the stockpile of debt building up on their balance sheets, people close to the matter say. The cable companies, though, likely could plow ahead.
"It's still early in the process, and there is a good amount of time for debt markets to stabilize as the auction proceeds," a Carlyle spokesman said. "It's premature to say strategics have an advantage at this point."
Corporations, known as strategic bidders, historically have had an advantage over private-equity acquirers in vying for deals, because they can use stock, cash or both to pay for deals. They also have the ability to eliminate overlapping expenses to justify a higher price tag.
The balance shifted in recent years as private-equity firms, coffers flush and with ready access to cheap capital through the debt markets, pushed the deal-price envelope with their all-cash bids. This year, 70% of deals for U.S. publicly traded targets have been all-cash transactions, according to FactSet.
Now, the pendulum may be swinging back.
"Strategic buyers were losing out on auction after auction," said Brett Barragate, a partner at law firm Jones Day in Cleveland. Now they "should be better positioned than they have been in these auctions because of their ability to finance deals using a variety of different means."