Private equity buyouts 2006
2006 was a remarkable year for mergers and acquisitions in general, but even more remarkable was the larger and larger targets of private equity firms, taking major public firms private.
The top-off at the end of the year was the announced acquisition of Harrah's, the world's #1 casino group. In a $17 billion deal, equity firms Texas Pacific Group and Apollo Management will buy out the company and take it private. The equity firms ended up outbidding a strategic buyer, the casino firm Penn National Gaming.
The move seems a natural one since the enormous cash flow has to be very attractive, allowing the LBO partners to pull a lot of cash, even with little growth in size.
The move comes a year and a half after the takeover of Caesars Entertainment by Harrah's in a $10 billion deal. That move in turn was a response to the acquisition of Mandalay Resorts by MGM Grand. Penn National itself acquired Argosy gaming in 2005 and a number of other mergers have taken place over the last five years.
Private equity deals increased by over 15% in 2006, including five off the six largest private equity buyouts in history. . The biggest equity firms, including Blackstone, KKR, Carlyle, and others, accounted for around $400 billion of the announced $1.5 trillion mergers and acquisitions. Is an equity bubble in the making?
Top 2006 equity deals
(All SU firms, values include assumed debt)
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Equity Office Properties Trust, the US's largest publicly held office-building owner for $36 billion (Blackstone Group)
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US hospital chain HCA Inc. for $33 billion (KKR, Bain Capital, and Merrill Lynch Global Private Equity)
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Natural gas pipeline company Kinder Morgan for $22 billion, (Goldman Sachs equity group, AIG equity group, a private investor).
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