With last week’s disheartening news that private equity firms are having a rough time closing deals (as targets hold out for more), p.e. firms may have to shed their good-guy image and get tough to get somewhere. According to Breakingviews authors Hugo Dixon and Taron Wade, p.e. firms are not hostile enough in their unsolicited bids for entire companies in the U.K. to be taken seriously. Until now, private equity firms have done quite well acquiring parts of companies, but as their coffers overflow, they need to do more to acquire properties and produce the returns that attract investors in the first place. “If you can’t follow through with a full hostile offer, you have little leverage to get the target’s board into serious talks,” write Dixon and Wade. Ever since the 1989 hostile bid for Nabisco by Kohlberg Kravis Roberts, say the authors, the p.e. industry has been trying hard not to look like predators. But, they conclude, “unless private equity houses are prepared to pile on the pressure, their flirtation with unsolicited deals isn’t like to advance much beyond flirtation.”
