The turmoil in the credit markets last week has raised serious questions about the future of the buyout craze that gave rise to the biggest deals in U.S. corporate history, the Washington Post reports.
For the past few years, a group of elite Wall Street players have been buying up major American icons and taking them private. These massive acquisitions have depended on access to cheap credit, which is supplied by a complex relationship between investment banks and hedge funds.
But with credit markets tightening, the pace of these deals, at least in the short run, is expected to dramatically slow.
“There is a crisis of confidence in the credit markets that is…letting a little helium out of the buyout balloon,” says Colin Blaydon, director of the Center for Private Equity and Entrepreneurship.
Alarmed bankers are pushing private-equity firms to scuttle deals or renegotiate prices, which most private-equity firms do not want to do. Such disputes are putting the relationship between these powerful players in jeopardy. Their partnership has been at the heart of the buyout boom and the source of enormous wealth for Wall Street.