Is imitation truly flattering?

In mid-2006, “YouTube” was a favourite expression that you might hear someone use to demonstrate they were hip. Au courant. On top of things. In the know.

In 2007, could the cool phrase be “private equity”?

Google has 31.7 million hits on that subject, more than the 18.5 million that turn up “American Idol” or 6.39 million for Lindsay Lohan. Google’s got more than 91 million Paris Hilton hits, but you get the point.

To that end, the media’s fascination with the private equity landscape is such that their stories are starting to sound alot like backwater blogs. So many new PE stories each day, but with so little new to say about the industry.

In their effort to stay on top of the trends “out there” (PE being the latest one), some mainstream journos may be forgetting that when they read or hear about material in the blogosphere, it’s no different than reading it in a book or another newspaper. It is not a unique thought if you repeat it. Regardless of the forum in which it was expressed.

Try this exercise. Read each excerpt, and see if any of these items sound the slightest bit familiar. The name of the Dead Tree Media outlet has been surpressed, as I’m not entirely sure it matters:

Dead Tree Media article, June 16th, 2007:

“For the moment, there’s no stopping private equity’s “golden era,” to borrow the phrase that Henry Kravis, the godfather of the LBO, used at a conference in Halifax a few weeks ago.”

Our blog, May 29th, 2007 (“KKR Founder Henry Kravis on PE climate“):

“While [Kravis allowed] that ‘private equity is in its golden era right now’, he sees no reason for that to change.”

Dead Tree Media article, June 16th, 2007:

“When it comes to private equity, the two most frightening words to any Wall Street banker are ‘burning bed,’ the nickname of a famous deal gone awry during the great LBO boom of the late 1980s.”

Wall Street Journal, June 12th, 2007:

The story titled “For KKR, Bumps in Its Buyout Binge” used that same “burning bed” line when it referred to the famous Ohio Mattress LBO deal that ultimately required First Boston to sell itself to Credit Suisse.

Dead Tree Media article, June 16th, 2007:

“Today, a few bankers have publicly voiced concern about foolish lending, among them Bank of America chief executive officer Ken Lewis, who recently got the attention of the world’s banks when he said: “We are close to a time when we’ll look back and say we did some stupid things.”

Our blog, June 1st, 2007 (“Maybe there is a credit bubble after all“):

“‘We are close to a time when we’ll look back and say we did some stupid things,’ Lewis said… ‘We need a little more sanity in a period in which everyone feels invincible and thinks this is different.’ Bank of America Corp. (BAC:NYSE) Chief Executive Officer Ken Lewis”

Dead Tree Media article, June 16th, 2007:

“In the U.S., banks hold just 20 per cent of “leveraged loans,” a term that describes not just buyout loans but other junk debt, according the Standard & Poor’s.

The other 80 per cent is held by institutional investors – hedge funds, mutual funds, pensions, insurance companies and so on. The biggest buyers are financial engineers who acquire a bunch of loans, pool them together as collateralized loan obligations, or CLOs, and sell them off in pieces – very often to those same hedge, mutual and pension funds.”

Our blog, May 31st, 2007 (“Henry Kravis on “the bubble” question“)

“In 1999 there were 62 U.S.-based leveraged loan providers, today they are 236. 80% of U.S. big ticket loans are now sold into these conduits by his estimate.”

– and –

Our blog, June 15th, 2007 (“US subprime borrowers sink deeper into trouble“):

“What impact will a 19% [subprime mortgage] delinquency rate have on the investors that bought packages of these loans in the credit markets?

What does that do to the CLOs, CDOs and syndication groups that are currently funding about 80% of U.S. corporate loans?”

Dead Tree Media article, June 16th, 2007:

“In Halifax, Mr. Kravis tried to puncture the notion that today’s private equity firms are gambling like never before. During the 1980s LBO craze, private equity firms like KKR would routinely buy companies and finance with less than 10 per cent equity, borrowing the rest. Today, it’s more typical to see firms put in 30 per cent equity.”

Our blog, May 31st, 2007 (“Henry Kravis on “the bubble” question“):

“Today, across the entire industry, the U.S. buyout market uses debt to fund an average of 70% of the total purchase price. Largely in keeping with KKR’s mid 90’s deal examples.

When compared with the current leverage component, if 30% of today’s deals are financed with equity, the sub 10% deals of the 1980s look awfully geared by comparison.”

Imitation may be the highest form of flattery, but who ever first used that line was probably the one doing the imitating.

I know what my grade twelve English teacher would have said. When you are doing research for an investigation, analysis or opinion piece, you can’t cite core facts and arguments and then pretend that they are common knowledge. Where did your data come from? How do you know what was said if you weren’t at a speech? Name all of your primary information sources, not just the folks you formally interview!

It could all be a harmless coincidence, of course. If so, it’s an uncanny one.

MRM