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It's a rough day for private equity. Carlyle is having a "crisis talk" with its investors because of the implosion of one of its debt funds.
Oh, and the Blackstone Group LP (NYSE: BX) announced its earnings report. There was a net loss of $170 million, which compares to a net gain of $1.18 billion in the same period a year ago. Unfortunately, the firm has little visibility as to when things will improve.
Simply put, Wall Street is not only concerned about the credit crunch – which means that fewer deals will get done – but also the stability of prior transactions. In other words, will some of them unwind and plunge into bankruptcy?
Well, according to a recent piece in the Wall Street Journal, we are already seeing evidence of this.
Sun Capital Partners saw two of its portfolio companies -- Lillian Vernon Corp. and Wickes Furniture -- file for bankruptcy. Something else: the firm is also the biggest shareholder in Sharper Image, which also filed for bankruptcy.
Keep in mind that Sun Capital is a top-notch firm, with about $10 billion under management and 40% annual returns since 1995.
The media tends to focus on troubled firms, as in some cases, these kinds of deals just get worse and worse – especially when the economy crumbles.
Basically, as we head further into troubled times, we will certainly learn which are the strong operators. And in light of the surge in dealmaking over the past few years, I'm sure Sun Capital won't be the only firm trying to put out fires.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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