P.M. Briefing : LBOs in 1990s May Lose Appeal

Leveraged buyouts of companies will likely be on the decline in the United States in the 1990s, the chairman of the investment firm Blackstone Group said today.

“I believe LBOs are a declining force. They were overdone. The astronomical fees and profits of the early-to-mid-1980s deals attracted too much capital, too many investors and too many marginal transactions,” Peter Peterson said.

“Many recent LBOs are destined for severe difficulties unless their earnings can grow at double-digit rates every year through the mid-1990s or they can manage to sell all of their assets at twice book value,” he told a news conference.

Peterson, a former U.S. Commerce Secretary, also said the revival of the U.S. manufacturing industry in the 1990s will require sustained foreign capital inflows, which he called “the equivalent of a global private sector Marshall Plan in the American industrial heartland.”