June 4, 2010 / 7:05 PM / 9 years ago

Buyout size increasing, not 'mega' yet-executives

* Large deals recently discussed

* Banks not rushing to do $10 bln buyouts-Rubenstein

* Deals likely in the $5-8 bln category-Nelson

By Megan Davies

BOSTON, June 4 (Reuters) - Private equity bosses are expecting deal sizes to gradually increase in size but said on Friday they aren’t forecasting an immediate return to mega-buyouts, like the $15 billion size recently discussed.

Deal sizes have been increasing since the credit crisis limited access to cheap financing for deals and as the recession has hurt companies’ earnings. Still, the size of buyouts is yet to break back into double-digit billions.

“Deals are getting done; including multi-billion dollar deals,” said Providence Equity Partners’ chief executive Jonathan Nelson at private equity conference Super Return U.S. “I would put money on the $5 billion to $8 billion categories actually happening.”

A consortium of buyout funds including Blackstone Group LP (BX.N), TPG Capital and THL Partners were recently in talks to buy Fidelity National Information Services Inc (FIS.N) for $15 billion. Those talks fell apart late in May over price, but the buyout firms had managed to get financing to support a deal.

There were two other large deals being talked about at the time, neither of which has so far happened, Nelson said in an interview on stage at the conference.

“The size was actually a problem — not knowing anything about the particulars, it would seem more rational that we (the industry) would work our way up,” said Nelson. “What happened at that time is there were two other deals in the market, at the same time, over $10 billion ... None of them so far have happened; something will, but my guess is it will be about half that size.”

Rhode Island-based Providence is a media and entertainment-focused private equity firm with investments in companies including Spanish-language broadcaster Univision Communications and New York Yankees sports channel YES Network. It was among the companies that bought into Hollywood studio Metro-Goldwyn-Mayer in a $2.85 billion buyout in 2005.

SMALLER DEALS RETURN

In the past six months, leveraged buyout deal flow has started to return. In November TPG Capital and the Canada Pension Plan struck a $4 billion deal, excluding debt, to buy IMS Health Inc, while earlier in April Apollo Management reached a $694 million deal to buy CKE Restaurants Inc CKR.N.

It is a turnaround for a market that hasn’t seen large deals since the end of the buyout boom, when there were LBOs such as Blackstone’s $26 billion deal to buy Hilton Hotels and Kohlberg Kravis Roberts & Co’s KKR.AS $26 billion deal to buy payment processor First Data Corp.

David Rubenstein, co-founder and managing director of Carlyle Group [CYL.UL], said at the same conference on Friday that it would now be possible to finance a deal about $5 billion to $7 billion in size, although the terms of the debt would be more expensive than at the peak of the bubble.

“Nothing is impossible ... but if you talk to banks now, I think they feel comfortable somewhere in the $5 billion range,” Rubenstein said on the sidelines of the conference. “But I don’t think banks are really rushing to (finance) a $10 billion buyout. We’re not back there yet.” (Editing by Gerald E. McCormick)

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