Most private equity firms want to close their deals in this environment because the economy is still fairly robust and the corporate world outside of the housing industry is still doing quite well. On the other hand the banks that made firm financing commitments to fund these buyouts on economic terms that are now only worth 90 cents on the dollar require that they perform on their commitment and take on average a 10 cent loss per $ of financing, or try to find a way out of an MAE or MAC clause that is generally very tightly written.
In the case of Harman this is the first big deal where it just so happens that the highly reputable firm, Goldman Sachs, is playing the role of both equity investor, along with KKR, and financing source. A potential conflict of interest? Why would Goldman's private equity managers want to force a 10 cent loss on the Goldman leveraged buyout financing bankers? Harman did announce a weak 2nd quarter but is that enouch to wiggle out of the deal? Anticipate lots of litigation if Harman's board exercises it fiduciary obligation to it's shareholders with a stock price down over 25% on yesterday's announcement.
From an audio perspective this can only be good news. I cannot imagine a set of circumstances where a leveraged recap like this would be of benefit for product innovation and maintaining high levels of customer service.
