John W Kaufmann and Matthew Hamm
Kirkpatrick & Lockhart Preston Gates Ellis LLP
Private equity firms, having experienced a record-breaking first half of 2007, were among the first to feel the effects last summer when the credit markets came to a standstill.
Because of the unavailability of credit, some private equity deals were re-negotiated at lower prices. The Carlyle Group's purchase of Home Depot's supply arm, for instance, was negotiated down from an agreed US$10.3 billion to US$8.5 billion. Other buyouts were postponed due to the credit squeeze, and some were cancelled outright. In October, private equity firm Cerberus Capital Management withdrew its US$6.1 billion takeover offer for Affiliated Computer Services, citing poor debt market conditions. Cerberus was not alone in this. By November 2007, 76 deals worth US$202.3 billion were abandoned, a substantial increase over the 55 unsuccessful bids worth US$98.9 billion during the same period in 20061.
