RPT-DEALTALK-Plain vanilla LBOs few and far between

(Repeats story that ran on Thursday afternoon)

* Average deal price has risen to 13.2 times EBITDA

* Percentage of M&A that LBOs make up has shrunk

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By Megan Davies

NEW YORK, April 28 (Reuters) - Large private equity firms see few opportunities for doing big 'plain vanilla' leveraged buyout deals as valuations are high and corporate bidders awash with cash can in many cases outbid them for assets.

While financing is available to do deals, the run-up in stock market values means that many potential targets are often too expensive for private equity firms, which typically target returns of 20 percent on their investments.

Private equity firms are known for striking leveraged buyout deals, typically by buying public companies using debt.

As public companies have been getting pricer, private equity firms have focused on alternative deals -- for example Blackstone Group (BX.N) and Kohlberg Kravis Roberts & Co (KKR.N) have both been investing in shale assets through partnerships with energy groups.

The year so far has been dominated by large strategic deals rather than large buyouts, such as power company Exelon Corp's (EXC.N) $7.9 billion deal to buy rival Constellation Energy Group CEG.N and Johnson & Johnson's (JNJ.N) $21.67 billion deal to buy Swiss medical devices maker Synthes Inc (SYST.VX).

As stock market values have risen, the price of mergers that have been clinched has increased, with the average price paid for an asset in the U.S. being 13.2 times a company's earnings before interest, tax, depreciation and amortization (EBITDA) so far this year, Thomson Reuters data shows.

That is higher than average figures for the last three years. The last time the annual number was higher was 2007 when the price paid was 14.3 times EBITDA.

The average multiple for U.S. leveraged buyout deals so far this year has also risen, to 10.6 times EBITDA, up from 8.9 times for 2010, Thomson Reuters figures show.

"If you take the average multiple and take the level of financing the market affords you and then you take a ... conservative economic growth scenario ... you cannot make a 20 percent return," said Joshua Harris, Senior Managing Director at Apollo Global Management (APO.N), speaking at a Thomson Reuters Buyouts conference this week.

"What spits out in the model generally is a 12-15 percent return," said Harris. "Our view is that's not enough."

Those sorts of buyout deals are not that interesting, said Harris, who said he's instead focusing on deals off the beaten track. One area he's looking at is buying shipping assets as a way to benefit from the boom in commodities.

Private equity and real estate giant Blackstone gave a similar view in its recent earnings call.

"Traditional plain vanilla LBOs of size" look pricey, Blackstone's Chief Operating Officer Tony James told analysts, adding that the volume of such opportunities is down.

Like Apollo, Blackstone is also concentrating on other opportunities such as shale, emerging markets and providing growth capital to small companies.

SHARE SHRINKING

Leveraged buyouts only make up 6.6 percent of U.S. mergers and acquisitions so far this year, down from 10.2 percent in 2010 and far below the 25 percent share seen at the height of the recent buyout boom in 2006, Thomson Reuters data show.

During that time, private equity firms took advantage of very cheap financing to strike numerous multibillion dollar deals.

"If you go back to when the mega deals were done in the 2006-8 era, a lot of those public-to-privates of scale were really a function of the cost of capital advantage that private equity had," said Rick Schifter, a partner at TPG Capital [TPG.UL], who spoke on a panel at the Buyouts conference.

While financing is available for deals, there is not the same "cost of capital advantage for private equity that existed in that era of mega deals," Schifter said.

"So the circumstances under which a transaction will occur will generally be that there's some perspective by a private equity firm that a company is perhaps better than the public markets are giving them credit for -- and those are few and far between," Schifter said.

TPG, together with rival private equity firm Leonard Green & Partners LP, last year struck a $2.86 billion deal to buy J. Crew Group Inc, a few months after the U.S. clothing retailer posted earnings outlooks for the third quarter and full year that were below expectations.

J. Crew's share price was hit as a result and Schifter said TPG saw "real value" in the company, which resulted in them doing a deal.

Leonard Green managing partner Jonathan Sokoloff, also speaking at the Buyouts conference, said his number one criteria in assessing a deal is "growth, because markets are very efficient -- you usually have to pay full price."

In addition to the J Crew deal, Leonard Green struck a $1.6 billion public-to-private deal in December to buy fabric and crafts company Jo-Ann Stores Inc.

Sokoloff said the trick is to be able to navigate around any kind of market.

"It's always a difficult environment," said Sokoloff. "People say there's too much money chasing deals or there's no credit markets, or the credit markets are too hot... or this or that. That's why it's fun, that's why it's interesting."

(Editing by Phil Berlowitz)