Investors Watching Management-Led Buyouts

Includes: GS, HCA, KMI, MER
by: Robert Zenilman

Excerpt from our One-Page WSJ Summary:

HEARD ON THE STREET: Backstory of Kinder LBO Underscores Web of Ethical Issues Such Deals Face

Summary: Investors are starting to question recent leveraged buyouts ('LBO') that team corporate management with outside private equity funds. For example, Kinder Morgan (NYSE:KMI) management took over two months to inform the board of directors that it was considering buying the company. Complicating matters, Goldman Sachs (NYSE:GS) went from being a Kinder advisor to being one of the company’s buyers. In HCA’s (NYSE:HCA) buyout, Merrill Lynch (MER) played a similar role, starting out as an advisor to the company and ending up as one of the buyers. Potential-conflict-of interest issues, coupled with the time it took for Kinder management to announce its buyout, are raising eyebrows: Investors want to make sure that companies which are going private in management/private equity deals are being sold at “fair” prices.
Related links: Full WSJ articleLBOs Making Executives Very, Very RichInvestment Banks Have Too Much Money On Their Hands8 of 10 All Time Largest Corporate Buyouts Occurred RecentlyKinder Morgan: The Path Not Taken By Enron • Bloomberg: Arbitrage Profit in U.S. Takeovers Pending on Sept. 28 • Forbes: Kinder Morgan Shareholders May See Modest Near-Term Upside
Potentially impacted stocks and ETFs: Bear Stearns (NYSE:BSC), Lehman Brothers (LEH), Morgan Stanley (NYSE:MS)

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