Leveraged buyouts are back, Milken conference panelists say

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Unemployment is high and the housing market remains weak. But in Beverly Hills on Tuesday, private equity players could hardly be more upbeat.

A panel of private equity fund managers at the Milken Institute’s annual Global Conference celebrated the comeback of highly leveraged deals -- which had ground almost to a halt during the financial crisis.

‘What a difference a year makes,’ enthused Leon Black, head of Apollo Management in New York.

Black and the other buyout honchos attributed the return of debt-financed acquisitions to the recovery in the credit markets and the overall economy.

‘The high-yield market is probably better today than it ever has been,’ said Scott Sperling, co-president of Thomas H. Lee Partners in Boston, referring to the junk bonds that finance many private equity transactions.

A new problem faces private equity investors now: The prices of target companies have shot up faster than fund managers have been able to scoop up bargains.

‘A lot of the low-hanging fruit, frankly, is gone,’ Black said. ‘The snapback has been unbelievably dramatic.’

Not surprisingly, the managers bemoaned what Black termed the ‘populist wave’ helping to fuel the Obama administration’s effort to boost oversight of the financial industry.

‘You’re seeing some wacky regulation, which makes running our business a lot more difficult,’ said Ted Virtue, chief executive of MidOcean Partners, which buys midsize companies.

Still, the private equity business has largely escaped the scrutiny aimed at other areas of Wall Street.

‘I’m glad I’m not Goldman Sachs today,’ Black said with a wide smile.

-- Walter Hamilton