May 27, 2009

Private Equity, Start Your Engines

Until yesterday, I had forgotten the Indy 500 was run this past weekend; sports media was dominated by the colt and filly stories of Mine That Bird at Churchill Downs and Rachel Alexander at Pimlico.  Similarly, the news coming out of Detroit related to Chrysler and GM seems to be dominating other business stories, including middle-market M&A activity. 

At ACG InterGrowth, the Association for Corporate Growth’s middle market M&A conference in Las Vegas over May 12-14, the sense of "private equity, start your engines" appeared to be the resounding theme. There’s still much to fix at private equity firms’ existing portfolios, and triggers are not yet getting pulled en masse, but the activities that preface deals, such as active deal and credit sourcing, are happening.  While the money may still be on the sidelines, the men and women at private equity funds who are in control of the money are not. 

Seller's price expectations have come down, credit is slowly returning to the market, and enhanced overall economic visibility is getting the buyer engaged in a search for bargains.  The summer is generally a slow period for M&A -- and in terms of deals closed, 2009 will probably be no different.  However, the hum coming out of the ACG conference is telling us to prepare over the summer as the race is going to start soon.

May 11, 2009

The Second, and Final, Demise of Pontiac

General Motors' soon-to-be-shuttered Pontiac line is named after an Ottowan Indian chief who attempted a siege on Fort Detroit just after the French Indian War, only to make peace with the British and be assassinated by a fellow Indian years later.

Perhaps it is destiny that has brought us to this evolution at General Motors. Those who have long followed GM know that radical change has been needed at the company for more than 20 years, and now the current economic cycle has at last forced history to repeat itself with Pontiac’s second jettison.

Pontiac's seige on Fort Detroit was ultimately unsuccessful and the outcome of the latest seige on Detroit is yet to be determined.  As a consequence, over the next decade, look for Detroit to revitalize its automobile legacy, with smaller, nimbler, perhaps private equity-backed manufacturers and service providers.