The leveraged buyout last week of HCA Inc., the for-profit hospital chain owned by the family of Senate majority leader Bill Frist, highlighted what investment bankers and Wall Street firms have known for years private-equity firms, flush with cash and willing to take on massive debt, now dominate the deal-making industry.
Los Angeles had its own version of the debt-laden leverage buyout last month.
The $13.7 billion sale of Univision Communications Inc., the Spanish language media giant, to a group of private equity investors led by Haim Saban's Saban Capital Group, catapulted monthly merger and acquisition activity in June to its highest level in more than a year.
A total of $20.6 billion changed hands in June for companies that were bought or sold in Los Angeles County, according to Goldsmith Agio Helms, a Minneapolis-based investment bank that compiles monthly deal data for the Business Journal.
That's 75 percent more than the $11.8 billion invested in the previous month, and even greater than the previous high of the past year of $19.6 billion invested in December, when many deals are rushed to close before the year ends.
Merger activity tends to wane in the summer, but this year investment bankers say the market remains hot.
"There's no deal too big for the private equity world," said Jim Freedman, managing director of Barrington Associates, referring to the $2 trillion in private equity buying power worldwide. "Last year, half of the companies we sold were sold to private equity groups. They are a lot more focused and efficient, generally, than strategic buyers in doing acquisitions because that's their business to buy companies."
Only a fraction of the 85 companies that were bought and sold in June actually disclosed their purchase price. Private companies aren't required to disclose information to the public.
Many public companies such as HCA and Univision, whose stocks were out-of-favor on Wall Street, are getting a new lease from private equity investors betting against current market sentiment.
With the bull market on the wane, large institutional investors are looking for new places to invest in.
"It's no secret that pension funds, foundations and endowments have put more money into hedge funds and private equity," said Jeffrey Lovell, chairman and managing director of private equity firm Lovell Minnick Partners LLC, in Rolling Hills Estates. "You have institutional investors looking for different types of return and willing to support different types of investment funds."
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