LBOs fueled by flood of money: Siris

NEW YORK (Reuters) - Private equity funds now snapping up a slew of American corporations are overpaying for companies because they are flooded with money they have to invest, a well-known money manager said.

"People are paying top dollar and they are getting away with it because the people doing it walk away with big fees, the banks lay it off to other banks and people are pressing the envelope," Peter Siris, founder of Guerrilla Capital Management LLC, told the Reuters Investment Outlook 2007 Summit on Tuesday.

Indeed, the spending spree is so buoyant because these funds resemble the American consumer, Siris said, adding "The law here is that money cannot stay in the wallet."

This year Freescale Semiconductor Inc., oil and gas pipeline operator Kinder Morgan KMI.N and broadcaster Univision Communications Inc. UVN.N have all agreed to large buyouts.

Public companies too are fueling the private equity boom as many executives are getting tired of being grilled by analysts every 90 days about how they are running their businesses.

"It is a pain to be public and expensive to be public," Siris said, adding "if you were a private company you'd have much different levels of debt." While public companies are often pushed to reduce their debt levels by analysts, when they are private the pressure evaporates and only the banks stand to lose money if executives borrow too much, Siris said.

Siris, who specializes in Chinese stocks, spoke one day after legendary bond guru Bill Gross echoed similar themes.

Gross said speculation abounds that a $100 billion leveraged buyout may be near. But Gross, like other speakers at the Reuters Investment Summit, said this may also indicate that the private equity boom is nearing its peak.

"Typically when you hear these mega events, it's the beginning of the end," Gross, chief investment officer of PIMCO, said.

"People are pressing the envelope," Siris said, forecasting that an upset may not be far away. "A year from now something will happen."