Big Dealmakers Think Small

In a world of $20 billion buyout funds and $100 billion bank bids, where is there left for the enterprising equity fund to go? Nowhere but down.

At least dollar wise, that is. A handful of private funds are turning their attention to deals they can do with pocket change - acquisitions costing less than $500 million or so.

The deals may lack sex appeal, but could make up for it in generous returns.

Variety reported on Monday that Cerberus Capital Management, weighing in at $22 billion in funds, has agreed to buy seven local television stations from CBS for a total of $185 million.

They're not only small market stations (Elmira, NY anyone?), but weak small market stations, the kind of assets that seem downright dowdy in this YouTube-and-iPod era.

But Cerberus remains confident it can slap lipstick on the pigs and flip them in a couple years' time as digitalized, better-branded commodities.

Silver Lake Partners, the mini-major firm focused solely on tech, is also toying with the idea that big things come in small packages. The $6 billion manager of funds is planning to debut a mid-market fund called Silver Lake Sumeru that will tip the scales as a $750 million featherweight.

Silver Lake is bringing in Ajay Shah (of Shah Capital Partners) to run the fund, so as not to distract the deal kings currently pulling in the Sabres, Seagates, and Sungards of the world.

Small game hunting might not be taking the finance world by storm quiet yet, but it's worth questioning how many monster deals are still lingering out there that make sense from a private equity point of view.

Not to mention whether some of the megabucks buyouts of late will turn out to be better at making headlines than profits.

by Liz Gunnison