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January 13, 2008

SPACs vs. LBOs

Bloomberg has an article comparing SPACs or "blank check companies" and LBO firms.
``It seems as if everybody is raising a SPAC,'' David Rubenstein, co-founder of the Washington-based private-equity firm Carlyle Group, said last month at an industry conference in Dubai. ``The jury is still out as to whether these are good things other than for the investment bankers who raise them.''

Thomas Hicks, the leveraged buyout pioneer and owner of the Texas Rangers of Major League Baseball, raised $552 million for Hicks Acquisition Co. I in September. ``I plan to use the vehicle to try to build three or four or five significant companies over the next five to 10 years because it's permanent capital,'' Hicks, 61, said in an interview from his office at Hicks Holdings LLC in Dallas. ``Once you make an acquisition, that entity has the ability to continue growing both internally and by acquisitions because it will be very lightly leveraged compared to leveraged buyouts.''

...``We're looking to back proven people,'' said Whitney Tilson, who manages about $160 million at T2 Partners LLC in New York. ``It's a much better deal than investing in your typical LBO fund. In your typical LBO fund you're locked up for 10 years and you can't give thumbs up or thumbs down on a deal by deal basis.''
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.