2014 was a good year for global mergers and acquisitions (M&A). Herb Allen and other companies like M&A global activity totaled $3.5 trillion which was up 47% from 2013 with 95 deals totaling $5 billion or more, and the top three deals that are still pending are valued at $66 billion, $67 billion and $70.67 billion. Working behind the scenes of these M&A transactions are investment banks and private equity firms who offer advice to buyers and sellers by putting a value on the business being bought out and negotiating a sell price. There are many investment banks and private equity firms around the world, and some of the largest ones are located in New York City.
Investment banks tend to work with businesses that are looking to sell whereas private equity firms work with businesses and investors who are looking to purchase other businesses in order to expand. One of the largest private equity firms in the world located in New York City is Kohlberg Kravis Roberts & Co. or KKR. KKR was founded by former Bear Stearns executives in 1976 and gained a strong reputation for specializing in leveraged buyouts where they would purchase a business using a significant amount of borrowed money and then use the assets of that business for the purposes of repaying the borrowed money. In 2007, KKR was involved in one of the largest leveraged buyouts ever of a Texas electric utility company for $45 billion.
Another private equity firm headquartered in New York is the Blackstone Group. Blackstone was founded by two former Lehman Bros. executives in 1985 and has grown to become one of the largest private equity firms in the world with offices in Europe, Australia, Asia and the Middle East. Along with private equity transactions, they specialize in alternative investments such as real estate and hedge funds becoming one of the largest alternative investment companies in the world. They were also one of the first private equity firms to go public and list shares on the stock exchange.
Private equity firms play a vital role in the global economy by helping businesses make purchases for growth opportunities. Some of the top firms like KKR and Blackstone are involved in some of the largest and most lucrative corporate buyouts in the industry. The recent healthy global economy has been good for the private equity industry.