Before July, there was a lot of discussion about whether Private Equity was paying too much for the deals that were largely responsible for pushing the market higher.

• Of course, the targets holding out for higher competitive bids said “NO.”
• Of course, holders of the shares who were not previously willing to pay the takeout price in the open market but got a 30% bump on the deal said “NO.”
• Of course, the companies in the same industry whose stock benefited from the speculative premium said “NO.”
• Of course, the Permabulls who saw the markets rise on this liquidity said “NO.”
• Of course, the banks who were financing these deals and collecting huge fees said “NO.”
• Of course, the legal advisors who were charging by the hour said “NO.”
• Of course, financial analysts and investment managers who were called on for their opinion sounded smart and said “NO.”
• Of course, the Private Equity firms said “NO.”

Back then, I took some criticism for suggesting that they were overpriced, but it really didn’t matter as long as the deals could be repackaged and sold by PE for an even higher price. So much for being a realist!! It was almost sacrilegious to criticize Private Equity deals. Most financial “journalists” were falling all over themselves to praise how smart Private Equity was. I guess they were afraid they might not get invited to the lavish parties or miss out on getting interviews. For whatever reason, almost everyone was convinced the pricing was not only fair, but it wasn’t too much. Often times, they went so far as to say that the Private Equity firms were just so great at operational improvement that they could fix these companies and optimize their capital structure to prove that the deals were not overpriced. Whatever!

So now that we see these same deals having trouble getting closed, what do we know about the pricing? Home Depot? Harman? Etc. Etc. It was a farce to say there was not excessive pricing going on in most of these transactions. Many of these people were either lying or stupid. Now that liquidity has reduced and the banks are struggling to sell this debt, suddenly the bargains aren’t so bargainish. And yet, if and when Private Equity deals come back, we’ll once again be told that they are not overpriced. Chances are the same people will be asked to comment again and even better yet, the market will agree with them.