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Hardware, telecoms seen to catch buyout wave

Posted: 25 May 2007 ?? ?Print Version ?Bookmark and Share

Keywords:private equity wave? leveraged buyout? buyout wave?

Financial services firm JP Morgan expects computer hardware and telecom equipment as the next technology sectors to get caught in the private equity wave, Reuters reported.

Raj Kapadia, managing director of leveraged finance at JP Morgan, said that software, services and semiconductor will continue to see a majority of the deals. "I think hardware is the next wave," he told Reuters in an interview at this week's JP Morgan Technology Conference.

Kapadia predicted that hardware firms not geared toward the consumer market are more likely to see leveraged buyout (LBO) activity than those in the telecoms equipment industry, where overcapacity, he says, is making the sector less attractive to private equity.

Kapadia noted that the first wave of technology buyouts hit the software sector four years ago, followed by a second wave that targeted services firms. Semiconductors followed in the third wave, he said, with the fourth wave coming in the past few weeks for financial services-related companies.

The biggest LBO could reach $80 billion, estimated Jim Casey, the head of JP Morgan's high-yield debt capital market. He said private equity firms overall have about $200 billion of unspent capital, which could theoretically work out to about 60-70 LBOs of around $15 billion each over the next five years.

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