Reply #39: KKR, Blackstone Fuel Record Buyout Fees for Investment Bankers

[54anickel]

http://www.bloomberg.com/apps/news?pid=10000103&sid=aeWAdL80OSBM&refer=us

July 11 (Bloomberg) -- Kohlberg Kravis Roberts & Co. and Blackstone Group LP, the world's two biggest buyout firms, are making 2005 an unprecedented year for leveraged buyouts, generating more than $4 billion of fees for investment bankers.

LBO specialists, which borrow about two-thirds of the purchase price to finance acquisitions, disclosed $148 billion of takeovers during the past six months, putting the industry almost 65 percent ahead of 2004's record pace, data compiled by Bloomberg show. The combination of stagnant stock markets and relatively low interest rates are enabling New York-based KKR, Blackstone and at least a dozen other firms to arrange another $100 billion, including LBOs for Grupo Auna, owner of Spain's No. 3 mobile phone company, and the Dutch bank NIB Capital NV.

``You're in the era of the mega-buyout,'' said Maurice Tchenio, 62, co-founder of London-based Apax Partners Worldwide LLP, which has raised a new $5.2 billion takeover fund.

KKR and Blackstone -- now completing the $10.6 billion purchase of SunGard Data Systems Inc., whose software handles most Nasdaq Stock Market trades -- helped the industry to increase its share of the $1.3 trillion global mergers market by 15 percent this year to 11 percent, Bloomberg data show. SunGard will be the biggest LBO since 1989 when KKR acquired RJR Nabisco Inc. for $31 billion.

LBOs are booming because stock markets are down more than 20 percent from the 2000 peak while borrowing costs are almost half what they were a decade ago. Fees from LBO firms are so important to bankers, who get paid for arranging the deals and providing the credit needed to finance them, that JPMorgan Chase & Co., the third-biggest U.S. bank, decided in March to spin off its own takeover unit to avoid losing LBO firms as clients.

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