On 12/1/2006, a private equity consortium led by Blackstone and including Carlyle, Permira Funds and Texas Pacific Group acquired Austin, Texas-based Freescale Semiconductor for $17.6 billion. The valuation multiples were huge and it was one of the highest profile deals of the 2006-2007 Private Equity mania. Now it’s not so hot. Sales are down. Its former parent and big customer Motorola is struggling and its automotive industry client base is in even worse shape. More importantly, like many of the buyout deals, it was overleveraged when it went private. As a result, Freescale bonds are trading at a steep discount and if it wouldn’t be for the covenant-lite terms and toggle bond components, default would seem even more probable than it already is. Of course, a default in any of the old Private Equity deals would put a serious hurt on the possibility of a return to the days of big PE lovefests. At all costs, these deals must be propped up. This is one case where putting good money after bad may have some merit. It’s kinda like putting your money where your mouth used to be. When Freescale agreed to buy SigmaTel a few weeks ago, I started to wonder whether we might start to see more of the old private equity deals buying small companies to improve cash flows. They cannot afford to do big transactions and rather than creating a separate new portfolio company, I suspect it’s better to try to fold them into some of the older companies that need help.