Companies cool to lures from buyout firms

4/30/2001

NEW YORK - Leveraged buyout funds may be flush with cash, but they are having a tough time spending it.

The economic downturn has left a landscape littered with broken companies in need of a fix. In theory, this is an ideal time for buyout firms browsing for bargains. Market experts say buyout funds are doing plenty of shopping. Buying, however, is another matter.

Potential sellers are slow to lower their asking prices, remaining reluctant to adjust their expectations to match the plunge in stock prices and slump in the economy.

More significantly, the supply of debt, from the public markets and from banks, remains tight. That makes it difficult for buyout firms, which use the capital to finance their transactions, to structure deals that would be financially attractive or profitable.

“People want to do deals in this environment,” said Rick Rickertsen, author of the recently published Buyout and chief operating officer at Thayer Capital. “It's the best time to be buying because you know things are eventually going to turn around. But I don't think sellers are quite there.”