Late return to private equity game
Five years ago Morgan Stanley got out of the private equity business. Turns out that was a big mistake, but why has it decided to start a new fund in Europe just as the private equity boom seems to be fizzling? Stephen Beard reports.
Morgan Stanley headquarters in New York City (Mario Tama/Getty Images)
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TEXT OF INTERVIEW
Scott Jagow: I don't know if you noticed this, but we've haven't mentioned any new private equity deals in a while. For a long time, hardly a day passed without a big buyout. Banks are really cutting back on the lending that financed so many of those deals. But curiously, Morgan Stanley has decided to start a new private equity fund in Europe. Our man in London, Stephen Beard, is here. Stephen, what is Morgan Stanley up to?
Stephen Beard: The bank is setting up a $6 billion private equity fund in Europe. The object, as with all private equity is to buy out companies around the globe. This does look pretty odd at a time when private equity deals are collapsing or being put on hold because of turmoil in the credit market.
Jagow: Well did Morgan Stanley say why they were doing this now?
Beard: Morgan Stanley clearly feels they missed a trick. They bailed out of private equity five years ago, missed out on the boom while rivals like Goldman Sachs plunged in and made a fortune, and the bank says they're determined not to miss out again.
Jagow: But isn't this kind of bad timing? OK they missed it, move on! I don't understand.
Beard: Well Morgan Stanley dismisses concerns about bad timing. They say actually this could be a very good time to get in as stock markets are subsiding and the price of potential buyout targets is deflating because some of these potential targets the prices have reached quite ridiculous prices. The bank insists that it's taking a long-term view. The co-head of the new fund uses a slightly unfortunate phrase in the circumstances. He says private equity is in remission but it's not dead and in the long term it can only get bigger.
Jagow: All right Stephen Beard in London, thank you.
Beard: OK Scott.
