Private Equity Alternative Deals
Do private equity firms ever buy, or would ever consider, an alternative deal like buying a multimillion dollar inventory of cars, if they knew they could resell the inventory at a much higher amount then they paid?
If the asset value was large enough, why not? There are plenty of quirky/opportunistic funds out there.
Thank you for your prompt reply. Can you name a few of these funds?
What size transaction are you talking?
Sure - though generally the folks doing these sorts of deals refer to themselves as special situations or specialty finance, vs just private equity.
Traditional PE funds, no, although there are always exceptions. Like @"RLC1" stated, at the fund level a specialty finance co may do something like that but a traditional PE fund that concentrates on taking control positions in operating companies will generally have limits on what they can do as stated in their fund documents. Fund docs typically drill down on what you can invest in and you can't go outside of those parameters. It can be as limiting as, for example, the fund can only invest in manufacturing companies in the midwest with EBITDA between $10MM and $30MM, or it can be wider saying that the fund can take minority or majority interests in any company it sees fit, but generally it will limit what you can invest in to operating companies and not something like inventory.
At a traditional PE fund you'd more likely do this within a portfolio company that has the operating capacity to do something like this. Most funds run pretty lean and there wouldn't be the internal capacity and expertise to sell off inventory because, while a hypothetical situation like buying a bulk amount of cars at a discount and turning around and selling them for a profit seems like an easy thing, in reality there's rarely an easy buck to be made so you'd need industry expertise in valuing the inventory, be able to take possession of it (you'd need a big lot or warehouse and the logistics to physically move the inventory), maintain it, and have the contacts to sell it to someone who would buy it for more than you purchased it for, because if it's a decent enough size of a deal the bigger players in the business will know about it and know what you paid for it, so there's a better chance than not that you'd have to sell it off piecemeal, further complicating what you thought as an easy process.
Somewhere between $1 million and $20 million. Any good leads?
Can you get rid of them very quickly and how much profit will there be? If you can sell them in bulk and there's enough spread check out a hard money lender. But only if you're absolutely certain that you can flip them quickly and cover their vig. I don't know what they're doing nowadays but you can probably do it without equity, close very quickly and roll the fees and closing costs into the loan itself.
Who is a hard money lender that would be interested in such a deal?
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