Friday, December 01, 2006

Private Equity Takeover Targets

Private equity has a lot of money to invest. The buying binge has just begun. The best way to spot future deals is to see what multiples private equity firms paid in recent buyouts. I focused on the retail sector.

Recent Deals
Golf Galaxy (9.9 xEBITDA) (0.82 xSales)
Eddie Bauer (9.3 xEBITDA) (0.6 xSales)
Yankee Candle (9.8 xEBITDA) (2.1 xSales)
OSI Restaurants (9.0xEBITDA) (0.77 xSales)

Based on recent deals, look for companies trading under 7 x EV/EBITDA , Price to sales under 1, a low amount of debt, and real estate assets)

Takeover Targets, EV/EBITDA, Price/Sales
Finish Line (FINL), 5.5, 0.50 (No long term debt)
Barnes & Noble (BKS) , 5.9, 0.51 (Stock options overhang)
Kirkland's (KIRK), 6.0, 0.21
Charming Shoppes (CHRS), 6.2, 0.56


Anonymous Anonymous said...

Investments in limited partnership interests (which is the dominant legal form of private equity investments) are referred to as Orange County equity investment which should earn a premium over traditional securities, such as stocks and bonds. Once invested, it is very difficult to gain access to your money as it is locked-up in long-term investments which can last for as long as twelve years. Distributions are made only as investments are converted to cash; limited partners typically have no right to demand that sales be made.

5/22/2008 9:57 PM  

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