Sabre - Michael Lewis

Silver Lake Partners and Texas Pacific have agreed to acquire Sabre Holdings, the owner of Travelocity.com for $4.4 billion. It will be interesting to see what they do with the company. It has half a billion or so in debt which was assumed and the other portion of Sabre’s business is its reservation system. From what I’ve read, this portion of the business is dying. So basically it’s a big play for Travelocity and I think to get anything of this investment, they’re going to have to increase revenue from Travelocity somehow. I would imagine they would merge the other portions of the business into Travelocity and create a company that, under the Travelocity name, provides all sorts of travel-related services. We shall see.

I know there have been a couple of different viewpoints on Michael Lewis’s piece in Bloomberg yesterday. A lot of people disagree with what he has to say about the private equity model, especially when he mentions how he feels that the middle class has been left/shut out from private equity investment and how this is unfair. Also he talks about how growth in private equity will hurt the capital markets. To his defense, he has limited exposure to how the industry works and is most likely basing his opinions on limited research, but you can’t completely throw his argument out. I too do believe that as more and more investor flock to private equity, capital markets will suffer, but also once private equity gets over-invested in, things should even back out (just like with hedge funds). He is correct however, when he says that the middle class has been left out of private equity. It’s virtually impossible for one to invest a small amount of money in private equity, but it’s the nature of the business and it takes big money to get big returns nowadays. Capitalism at its finest I suppose.