Some people like to say "No Pain, No Gain". In the private equity world, I like to say "When there is pain, there will be gain." There are lot of people out there who feel that the natural evolutionary cycle of the markets ensure that with every bust there will be another boom. In this day of pain, there will be gain and those who are in position to take advantage of the carnage will come out on top.
One thing unique to private equity funds, particularly buyout funds is that they always have a war chest of capital to deploy. We happen to be at a point where cash in king and these funds can come in and pick up assets for pennies on the dollar. One great example of this is Lehman Brothers and their once prized Neuberger Berman wealth management unit. Word on the street is that Bain and Hellman may pick it up for 1/10th is true value! This is not like buying distressed assets and waiting for a turnaround. NB is a strong brand with excellent cash flow and is a cash cow that will virtually guarantee a high multiple return on both Bain and Hellman's funds.
Another excellent example of is Barclays picking up Lehmans IB unit. It's a complete steal and no wonder why Barclays walked away from the transaction last weekend.
Perhaps Lehman filed bankruptcy one week too early. Perhaps Merrill sold out too soon.
Either way, for those that picked up solid assets in this time of pain, they will see gain and you will start to see excellent returns from these buyers over the next several years.
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