We are the world

From Atlanta to Zurich, the M&A market spans the globe and accounts for hundreds of billions of dollars worth of deals. Arabian Business profiles some of the sector's major players - both in the Middle East, and around the world.

Berkshire Hathaway
United States of America

Omaha, Nebraska is the home of holding company Berkshire Hathaway and its legendary chairman and CEO, Warren Buffett. The ‘Oracle of Omaha' is the third-richest man in the world, having amassed a personal fortune of around US$52bn from astute investments managed through the company.

Berkshire Hathaway's core business is insurance, including property and casualty insurance, reinsurance and specialty non-standard insurance. Conducted through more than 50 domestic and foreign-based insurance firms, Berkshire's businesses provide insurance and reinsurance of property and casualty risks primarily in the US. In addition, as a result of the General Re acquisition in December 1998, Berkshire's insurance businesses also include life, accident and health reinsurers, as well as internationally-based property and casualty reinsurers.

Meanwhile, Buffett has used the ‘float' provided by insurance operations to finance his own investments - and he rarely gets one wrong. While in the early part of his career at Berkshire, he focused on long-term investments in publicly quoted stocks, more recently he has turned to buying whole companies. As a result, Berkshire now owns a diverse range of businesses including candy production, retail, home furnishings, encyclopedias, vacuum cleaners, jewellery sales, newspaper publishing, and the manufacture and distribution of uniforms and footwear.

The Carlyle Group
United States of America

Politically connected and phenomenally powerful, the Carlyle Group is the embodiment of the US's vast military-industrial complex, better known as the ‘Iron Triangle'. Playing heavily in the highly government-regulated defence industry, the firm's name is synonymous with controversy and conspiracy. The unashamed use of prominent politicians across the world as fundraisers, lobbyists and advisors is a defining feature of the group's operations.

Founded in Washington in 1987, the Carlyle Group has more than US$17.4bn under management. By its own estimation the firm has completed more leveraged buyouts and venture capital investments in the defence and dual-use technology industry than any other PE company on the planet.

Critics fear that the firm has become so influential through its political connections that it has the ability to effect change in government policy in order to benefit investments. Such suspicions are inspired by the impressive array of politically connected individuals associated with the firm (see below), and some of the more controversial deals Carlyle has brokered - such as the 1997 acquisition of United Defense, one of the US's largest military contractors.

Last week it was revealed that the group paid Washington-based lobbying firm Ogilvy Government Relations US$260,000 to lobby the US government in the first half of 2007. Ogilvy fought against proposed legislation that would raise taxes for private equity firms and their managers, and on a series of foreign investment issues.

Among the biggest PE deals in the world, significant takeovers by Carlyle include car-company Hertz for US$15bn in 2005 and the May 2007 acquisition of Kinder Morgan, one of the largest energy transportation storage and distribution companies in North America, for US$21.6bn. With fellow PE house Bain Capital, the group is currently looking to acquire the construction-supply unit of Home Depot Inc, the US's second largest retailer.

A pioneer of PE in Asia, some high-profile setbacks in China have marred its performance in the region.

Blackstone Group
United States of America

One of the world's largest private equity firms, Blackstone Group was founded in 1985 and is based in New York City, with offices in Atlanta, Boston, London, Hamburg, Paris, Mumbai, and Hong Kong. A stalwart of the US's burgeoning PE sector, it is renowned for its part in the migration of companies from public to private hands - a market worth in excess of US$370bn in transactions in the US over the last year. In recent years Blackstone has made significant investments in the hotel and commercial real estate industries by buying seven large publicly-traded firms and taking them private. The most prominent acquisition came this summer when the Blackstone Group and Hilton Hotels Corporation announced plans for the PE player to acquire the giant hotel chain with all its debt assumed in a cash deal valued at US$26bn.

This year, the Blackstone Group also sold Global Tower Partners to Macquarie Infrastructure Partners for an enterprise value of US$1.425bn, and purchased The Tussauds Group for US$2bn from Dubai International Capital.

In December 2006, Blackstone as part of a Consortium of private equity funds including Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. and TPG, agreed to purchase all stock shares of Biomet for approximately US$10.9bn. Biomet is a worldwide manufacturer and marketer of hip, knee, shoulder, and spinal implants and supporting surgical supplies for the orthopedic industry. On a larger scale, a month earlier Blackstone agreed through its affiliate, Blackstone Real Estate Partners, to acquire billionaire Sam Zell's Equity Office Properties Trust, for approximately US$39bn - a deal that became the biggest takeover of a real estate company and one of the largest PE deals in history.

Kohlberg Kravis Roberts & Co. (KKR)
United States of America

New York-based KKR is known for playing hard and fast. Pioneers of the leveraged buyout, the men behind the infamous firm are perhaps better known as the ‘Gordon Gekkos' of the PE world. With an aggressive approach to acquiring target companies the firm is commonly held to epitomise all that is menacing and unethical about PE: heavily leveraged takeovers favouring the issuance of high-yielding junk bonds to raise funds; ruthless restructuring and cost-cutting; and of course, massive returns on investment. KKR was established in 1976, and in 1979 became the first PE firm to complete the takeover of a public company. In 1988 it broke records with the buyout of US conglomerate RJR Nabisco. With a price tag of US$31.4bn, including net debt of US$6.3bn, the acquisition marked the highest price ever paid for a company, when adjusted for inflation. This record is about to be re-set - by another KKR-led acquisition. In February the company announced plans to takeover energy company TXU, originally valued at US$45bn. KKR is expected to list on the New York stock exchange in September with an IPO worth US$1.25bn. Investors have shown little appetite for the stock, but the company has persistently denied rumours that it will postpone the move.

Defying credit market turmoil, KKR is currently on track to complete a US$26bn buyout of First Data, a US payments and credit card processing firm, having concluded a controversial buyout of Alliance Boots.

Yet despite its successes, the firm has suffered from some heavy losses on recent investments, and many of its original partners have bailed out. The iron rule of remaining founders Kravis and Roberts reigns supreme at KKR, yet unresolved succession issues cast a shadow over the firm's future.

Bain Capital
United States of America

A model of the US corporate image, Bain's original US$37m fund was raised entirely from private individuals in mid-1984, led by Ricardo Poma, a Salvadorean businessman. Conceived as a combined equity start-up and leveraged buyout fund one of the fund's first start-up investments was Staples, Inc., the US$15bn office supply retailer.

Today, 23 years after its inception Bain Capital currently manages US$40bn in assets and holds positions in such iconic American companies as Toys ‘R Us, Burger King and Unisource. It has been a busy summer for the firm too. In June, Bain, Carlyle Group and Clayton, Dubilier & Rice agreed to acquire Home Depot Supply for US$10.3bn, each firm buying a one-third stake in the division. Negotiations over the deal are ongoing and in recent weeks the price has dropped. Just a week after registering their Home Depot interest though, Bain signed a deal with Guitar Center to acquire the music retailer for US$1.9bn, plus US$200m in debt. The buyout will be for US$63 per share, a 26% premium on its June 26 closing price, and is expected to be completed before the end of the year.

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