Naturally the question arises as to how big deals can go and is it the debt or the equity that is the limit?
Greg Fleming, president of global markets and investment banking at Merrill Lynch, thinks there are natural constraints in raising the debt: “On the equity side, club deals are being put together with five investors taking multiple billions each, but at some point the ability to finance above a certain size will become very difficult.”
Merrill, together with Bain Capital and Kohlberg Kravis Roberts, took part in the previous record breaker to the Blackstone deal, the $33bn buy-out of hospital operator HCA, last July.
Another senior investment banker thinks there is an equity limit because investors will not want to see their funds too concentrated. He also points out that the public markets have expanded significantly and that the size of private equity deals in relation to the size of the public markets has stayed in proportion.
But maybe it is the ability to manage the company that limits the size of deals. With five investors to answer to, that is quite a headache for the management.
