In an interesting twist in the private equity world, much of the news this past year involved deals between private equity firms. Many of these deals, as David Benoit and Ryan Dezember of The Wall Street Journal have pointed out, involved private equity firms selling “boom-era buyouts.” The biggest deal from 2012, for instance, was the Carlyle Group LP’s $3.3 billion acquisition of a controlling stake in Getty Images Inc.
In a recent article by David Benoit in The Wall Street Journal, he explained that many private equity firms have turned to secondary deals. He gave the example of the recent sale of Safety Kleen to Clean Harbor for $1.25 billion. Highland Capital Management L.P. with co-founder and President Jim Dondero had a nearly 40% stake in Safety Kleen. They managed to earn a $374 million pay day from their deal.
From this deal, Highland Capital Management earned approximately four-times its initial private equity investment. As James Dondero told Deal Journal, the investment took a great deal of work and restructuring. When it was time for an exit, as James Dondero explained, a “dual path process was the best way to ensure a competitively priced exit.”
As Highland Capital Management’s Jim Dondero said, “There were a few natural buyers who really understood the business. Clean Harbors was clearly the most logical and complementary buyer.”
