Alvarez says corporate buyers have edge

NEW YORK (Reuters) - Corporations will likely be the dominant buyers of company assets in the current financial crisis rather than private equity firms due to tightened bank lending practices, the co-founder of turnaround firm Alvarez & Marsal said on Wednesday.

The availability of cheap cash in recent years had made it easier for private equity firms to use debt to outbid strategic companies for assets, but banks have since cut access to that cash amid a broad financial crisis.

Corporations, or strategic players, traditionally had an edge over private equity buyers because of their ability to combine operations and cut costs, Tony Alvarez II said during the Reuters Restructuring Summit.

"In normal times strategics have an edge, but in these tougher times when you have tight liquidity to finance transactions, I think their edge is going to become bigger," Alvarez said.

A company does not necessarily have to be the biggest player in the industry, he said; it just needs to be able to consolidate operations.

"I think there are going to be more strategics," he said.

A company looking to sell its whole business or parts of it will need to move much more quickly than in the past, according to Tony Alvarez III, head of the firm's European operations and the co-founder's son.

He expects companies to be forced to sell as the debt that they secured during recent years under favorable terms -- so-called covenant- light debt -- comes due but cannot be replaced by new financing because of the tighter lending environment.

Pointing to JPMorgan Chase & Co's (JPM.N) purchase of Bear Stearns being arranged within one weekend as an example, Alvarez III said executing quickly can be the key to saving a company.

"You are not going to be able to hold out for the highest value," he said.

(Reporting by Caroline Humer, editing by Dave Zimmerman and Gerald E. McCormick)