In a time of collapsing mega-deals, a few well-structured buyouts with sound companies can still get done.
Deals to take 3Com and Avaya private that made news on Friday show that major private-equity transactions are squeaking through these days, making a lie of the recent refrain that deal-making is dead.
Wounded, yes. Dead, no.
"We've been through a real shock to the system, and if you're not somewhat nervous then you don't have a pulse," said Alfred E. Goldman, chief market strategist of A.G. Edwards. "But, it's like any investment, the good will triumph over the bad ones."
The dislocation of global credit markets -- where buyout shops raise money to acquire companies and then take them private -- has caused big private equity deals to dry up.
Wall Street has been watching closely to see if Kohlberg Kravis Roberts could complete its $26 billion acquisition of First Data amid the summer's market turmoil. It was considered a harbinger for future debt deals, and at one point there was concern the private equity firm wouldn't attract enough investors to buy billions of dollars in debt.
Bankers on the deal were able to sell about $10 billion -- nearly double what they set out to raise when they began marketing the deal last week. And that bodes well for some 85 pending deals that are seeking to raise $277 billion, according to data provided by Dealogic.
With the First Data deal nearly completed, it sends a very strong signal that the worst might be over. There is no question that buyout shops may never again see the kind of easy credit terms that helped fuel the industry in recent years -- but there's a growing sense that deals will still go through, as long as the companies involved are well run, are not loaded with debt and have good prospects to expand their business.