Private equity interest helped fuel consolidation in the semiconductor industry recently. But with global credit conditions tightening, that interest is likely to subside as deals in the volatile sector entail a higher degree of risk. The chip industry, with its highly cyclical business and uneven cash flow, is exactly the sort of industry private equity firms traditionally don't like. That changed in recent years as the availability of cheap debt allowed private equity firms to pile into the sector. But now that's poised to change as the developing credit crunch threatens to curb financing for such deals..
"In this cycle, fewer lenders are willing to take as much of a piece of that kind of debt as they were before because given the credit tightening, they want to be paid more regularly," said David Eich, partner at Kirkland & Ellis.
This article appeared in its entirety in the August 31, 2007 edition of Dow Jones International News.