Credit Bubble Watch: Danaher-Beckman Edition

Rob Kindler
Rob Kindler

Danaher's cash purchase of the medical diagnostics company Beckman Coulter came in at $5.8 billion, well above the price point that many analysts would have pointed to for Beckman.

Rob Kindler, the head of M&A for Danaher's advisor Morgan Stanley, said today that the price was driven up by the access of private equity to easy credit.

"Private equity guys were looking at this company. 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,” Kindler told David Faber on CNBC’s “Strategy Session."

Translation: the financial buyers are back because easy financing is back. They can afford to pay top dollar for companies because their cost of financing has fallen significantly.

It was not that long ago that everyone was saying that “strategic buyers”—Wall Street’s term for companies with lots of cash that actually want to buy up other companies in their field—would beat “financial buyers”—the private equity companies that rely heavily on borrowing to fund their purchases—when it came time to do deals.

That’s over. Financial buyers—private equity guys—are back in the game and able to compete with the strategics. Even when they don’t win the deals, they can drive up the prices.


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