By Agency Reporter

Private equity firms are turning to deep-pocketed sovereign wealth and pension funds as they chase bigger deals, avoiding the often uneasy partnerships with rivals that marked boom-time deals.

Debt markets are ‘hotting’ up with high-yield and loan investors ready to step in with billions of dollars of funding for deals like Polkomtel and, recently, Kabel Baden-Wuerttemberg, should private equity win, according to a report by Reuters on Thursday.

But the equity checks that come with such large targets also run into the billions and are too big for most buyout houses to foot, bankers and private equity executives said at the Reuters Global merger and acquisition summit this week.

Large passive investors, known in the industry as Limited Partnes or LPs, enable them to boost their purchasing power without having to partner competitors who often have contrasting views and agendas.

“In 06 if you wanted to put together $3bn of equity you’d call one of the big firms,” Garrett Moran, chief operating officer of Blackstone’s private equity group, told the Summit in New York on Wednesday.

“Now the big LPs are saying ‘call me first’,” Moran said.

Large consortia or four and five buyout firms marked the multi-billion euro buyouts of the likes of chip-maker and telecoms group.

While the returns have been high, TDC investors have doubled their money and are still majority owners, the headaches make large co-investors a more palatable option.

Source: Punch