FT.com, The Financial Times online edition, reports that banks are hiring private equity executives to beef up the teams that manage failing businesses, especially as they begin to take control of more of them during the current economic downturn.
Banks need to find people for their “work-out” teams — executives who know how to actively manage a company and sit on its board. They initially tried to find qualified executives from within their own private equity operations but are now seeking outside experts.
Many banks have learned from experience in the 1990s that perhaps the best way to avoid an insolvency among distressed companies is to take an equity stake and help the company restructure its business. These so-called debt-for-equity swaps are expected to become more common in the current financial crisis. They could also leave banks holding equity positions in a large number of companies.
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