Press Release Private Equity

Past Fiascoes Show Risks of Return to Private Equity Megabuyouts and Club Deals


05/14/2021 11:30am

Contact: Dan Beeton, 202-239-1460Mail_Outline

Washington, DC — A new piece by Eileen Appelbaum in The American Prospect, “Is a Private Equity Club Deal Coming to a Pension Fund Near You?” warns of the risks to investors from new megaclub partnerships among private equity (PE) firms seeking to acquire Medline Industries, the US’s largest manufacturer and distributor of medical supplies to hospitals and doctors’ offices.

Appelbaum details several past examples of private equity megaclub deals that turned sour for limited partners. These include PE firms’ default on debt related to their attempted conversion of the Stuyvesant Town-Peter Cooper Village apartment complex in New York City to condos; limited partners’ loss of 95 percent of their investment in PE-acquired Energy Future Holdings in Texas; suits against Mervyn’s and Buffets’ respective PE owners after the companies each went bankrupt; and a 40 percent haircut when Caesars Entertainment’s PE owners took it public.

“Medline Industries is a successful company today, but if it cannot manage to service a new $10 billion debt (and how many companies could?), it may default on its debt and enter bankruptcy, wiping out the equity of the PE firms’ limited partners,” Appelbaum warns.

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