Investment Banks, Hedge Funds, and Private Equity

The Toys “R” Us LBO

“I don’t want to grow up, I’m a Toys ‘R’ Us kid” was the famous marketing slogan of Toys “R” Us (the “Company”), the world’s leading specialty toy retailer for much of the 1980s and 1990s. Private equity industry veterans may have had a similar attitude regarding the maturation of their industry. In its infancy, the industry had consisted of relatively few firms and lucrative investing opportunities that far exceeded capital in the industry. By 2005, however, a record amount of capital had been committed to the industry and aggregate transaction values had reached a new high. The industry had become intensely competitive and the best investing opportunities were being chased by too much capital, making it difficult for investors ...