Private Equity Players See Signs of Excess in Buyout Market

NYT ^ | 2-26 | MARK SCOTT

[ExxonPatrolUs]

BERLIN –The buyout market is showing signs of the excesses that led to the financial crisis, leading private equity managers say.

Speaking at an annual private equity conference in Berlin, Howard S. Marks, chairman of Oaktree Capital Management, said investors continued to pay high prices for companies and were tapping into growing amounts of cheap credit to finance takeovers.

“We are seeing some elements of precrisis behavior,” Mr. Marks said on Tuesday at the SuperReturn International 2013 conference. “We are seeing people engaging in bullish behavior.”

His comments come after a series of recent multibillion-dollar deals, which have raised expectations that debt-fueled buyouts are back.

Michael S. Dell and Silver Lake struck a $24 billion deal this month to buy Dell,the computer maker. And Warren E. Buffett’s Berkshire Hathaway and the Brazilian firm 3G Capital have agreed to pay $23 billion to acquire H.J. Heinz,the maker of Heinz ketchup.

As fears wane over the European debt crisis and the American presidential election, access to capital markets has slowly returned, including debt financing for potential deals.

Over the last two years, investors have flooded into the world’s debt markets. The greater demand for bonds and other products has allowed firms to tap into the capital markets, including the so-called high-yield market that has traditionally funded riskier investments.

The growing ability to finance deals has led to increasingly higher price tags on potential deals, according to Leon D. Black, chief executive of the private equity giant Apollo Global Management.

“With easy money, there’s a temptation to pay higher prices,” Mr. Black said on Tuesday “There’s no institutional memory, we know that about Wall Street.”