Friday, May 30, 2008

"Ain't got no choice"

“PE firms in no hurry to exit” – reports Economic Times.

“Have they got a choice ?” I ask.

The report goes like this. With the primary market down in the dumps, the M&A route has become the savior of PE firms seeking exits. So far they’ve made 11 M&A exits in 2008 while during January-May 2007 the corresponding number of deals was 25. The number for 2008 also includes a few hypothetical exits – where there had been an IPO by a portfolio company yet the PE firm chose not to exit – in OnMobile Global, Shriram EPC, GSS America and Titagarh Wagons.

I see PE funds making the same mistakes like a retail investor does or worse. The only difference is the retail investor gets into the market at the peak of a bull market, listening to the Dalal Street sandwich/lassi vendor. PE fund managers do it – in much larger scales – despite their networked access, domain expertise and operational agility.

So much for Ivy league MBA, deal closing skills, street smart image and with a brain as shrewd as a sack full of rusty door knobs.


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