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Private Equity Driving Up M&A Prices: Morgan Stanley

Monday, 7 Feb 2011 | 1:45 PM ET

Danaher's $5.8 billion cash purchase of the medical diagnostics company Beckman Coulter was driven by private equity competition, according to Danaher's advisor Morgan Stanley.

"Given where you can get leverage now and given the returns that they're looking for, which are lower than historical, I think the pricing was driven by where the private equity guys are," Rob Kindler, vice chairman and global head of M&A at Morgan Stanley , told CNBC on Monday.

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"It's interesting, because these corporations have a lot of money to invest and one of the issues for them is competing against private equity guys," Kindler said.

"The fact that Danaher's stock is up shows that the market likes it when people do what are perceived as smart deals," he said.

It's going to be a good year for mergers and acquisitions, Kindler said. "The fact is, what drives M&A, primarily, is whether we have a fairly stable stock market and a fairly good stock market."

"I think there's less volatility in this equity market now and I think its likely the equity markets are going to do okay this year," he added.

Meantime, the closely watched M&A sagabetween Air Products and Airgas for the past 18 months has reached a fever pitch, in anticipation of Tuesday's poison pill trial in Delaware Chancery Court. At issue is whether to toss the pill or not.

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"My own view is it's unlikely that the pill gets invalidated, either by Chandler or the [Delaware]Supreme Court," Kindler said.

"What people have missed though, I think pretty much completely, is that this has no bearing over whether Air Products can succeed in buying Airgas," he said, adding, "I don't see any path in which Air Products can buy Airgas."

In December, Air Products raised its bid for Airgas to $70 per share or $5.9 billion, and called the offer "best and final."


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