Creditable press reports say RBS has left several major private equity players out of the sale, which includes Direct Line and Churchill, leaving a straight run for eight trade bidders (RBS refused to comment and lead M&A counsel Linklaters gave a gnomic response suggesting that the full story had not been revealed but reactions from lawyers in the clubby private equity world is that buy-out bidders have indeed been left out of the process).
On one level, such a move seems odd given that the capital-challenged bank would be limiting competition for an asset that it badly needs to raise a good price. Some buy-out partners have even speculated that its stance could be due to a commercial conflict as RBS is such a regular debt provider to the European buy-out community. That still seems an unconvincing reason to exclude the private equity shilling as the bank could simply make it clear that it did not want to lend on one of its own disposals. What it does illustrate is the dramatic reversal of fortunes since last summer’s prolonged credit turmoil, reversing the previous dominance of private equity acquirers in the most coveted M&A auctions.
But for all the symbolism of RBS’s stance, it is probably a false dawn for those foretelling a summer and winter of discontent for private equity. For a start, top houses have to raise funds with great success throughout the crunch. Likewise, for all the predictions last autumn that deal-starved trade buyers with healthy balance sheets would be returning to the market, so far there has been little upturn in activity beyond sectors like commodities and mining in which they were active before the crunch.
Perhaps more importantly, there are mounting indications that the crunch as financial phenomena is drawing to a close as the secondary market for leveraged loans creaks back to life. That leaves the impact to make itself fully felt on the actual economy which, ironically, suggests trade buyers would be constrained as profits come under pressure. That could leave buy-out bidders to again seize the initiative. It will take some time for private equity to get a head of steam going again but the industry has established itself as a serious force in global deal markets. The welcome news for the City’s restless legion of bored private equity lawyers is that the barbarians will be back again in the not-too-distant future.
Dickson Minto’s familiar dilemma
Still with private equity, despite the not-entirely-convincing denials from both sides, it seems apparent that Anglo-Scots boutique Dickson Minto and
Of course, succession issues still loom large over the highly-respected, highly-profitable Dickson Minto. After all, it was back in 2001 when a strategy document by the Scots firm conceded that “the status quo” of independence was not sustainable, arguing that “milking the franchise… was possible in the short to medium term, but no longer than that”. Dickson Minto’s preferred solution back then was to beef up its international referral links, though there has been little evidence of success on that front. Still, while these would appear promising omens for Willkie, partners should note that the aforementioned document found a “general antipathy among the partners for a link-up with a
