Private equity makes ‘guarded’ comeback to US bank scenario
Private equity is making a 'guarded' comeback with deals, after its ruinous venture into banking early last year! A group of eight buyout firms - comprising Blackstone Group LP, Carlyle Group, and WL Ross & Co. - took over Florida's failed BankUnited FSB on Thursday, with a recapitalization cash infusion of $900 million, and the government supporting the deal.
The deal has been billed by the government regulators as a welcome affiliation between private investors and public funds. However, evidently, a large part of the burden of reconstruction of BankUnited will have to be borne by the public.
BankUnited has also drawn a bid from Toronto Dominion Bank, but the private equity consortium turned out to be triumphant. One of the consortium's members said that the BankUnited takeover "would demonstrate to the skeptics that private equity can be the lowest-cost solution."
In the present scenario, real estate markets are on the downslide, spelling disaster for several of the 8,300 U. S. banks -with some on the verge of a collapse. Meanwhile, private equity funds have approximately $1 trillion of untapped funds at their disposal.
With regulators apparently working with private equity firms looking to buy banks, Seamus McMahon, CEO of bank consulting firm McMahon Advisory LLC, said: "Private equity firms are going to have a lot of influence."