The lowly valued UK stock market makes a tempting target for private equity buyers. Companies in the throes of a cyclical slump make the choicest morsels of all.
That thinking should apply to strategic buyers too except that, rather than sitting on dry powder, they may be suffering a downturn of their own. The solution? Get a private equity fund to finance your bid.
That is the route Nasdaq-listed Viavi has chosen to go down. The $2bn telecoms equipment maker has made a recommended £1bn bid for London’s Spirent, which will be partly financed via a $400mn convertible pay-in-kind toggle loan from Silver Lake. Such private investments in public equity — or PIPE — deals are relatively common in the US, offering private equity houses a downside-protected route into a company’s share capital. Silver Lake itself made a similar investment in Germany’s Software AG, which it ended up acquiring.