What All Mega-Buyouts of the Mid-2000s Have in Common
May 12, 2014
Energy Future Holdings’ bankruptcy filing two weeks ago put to rest another chapter in the book of boom-era PE buyout failures. Of the largest buyouts since RJR Nabisco was acquired by KKR back in 1989, Energy Future Holdings, formerly known as TXU, was the largest and biggest failure of them all, having gone down with nearly $50 billion in obligations to its creditors. Others, such as Harrah's Entertainment (now Caesar's Entertainment), First Data and Archstone Smith continue to exist, but have either bled money or remained under the pressure of heavy debt loads, creating long-term burdens for their PE backers.
The financial crisis obviously played its part in many of these failures, having occurred shortly after the buyout boom of 2005-2007 and diminished values considerably, but the common theme across the board is that these deals were both very large and incorporated very high amounts of debt. What companies succeeded and failed? And what did PE firms learn?
To read more and view an informative table of the 10 largest buyouts since RJR Nabisco, click here.