Sunday Scaries Vol. 14

Three Fed officials voted to raise rates, which hasn't happened in the same direction since 2016. Oil ran to $90 and handed most of it back. And the biggest LBO ever recorded finally closes Tuesday. Quick recap before Monday.

We'd been calling July 29 the live meeting since the June minutes came out, and it didn't disappoint. Three officials broke ranks and voted to hike, which hasn't happened in the same direction in almost ten years. Oil spent the rest of the week getting jerked around by Iran headlines, a $644 billion credit manager went shopping for a buyout firm, and the largest LBO ever recorded closes Tuesday. Ammo for Monday.

Top Stories of the Week

1. Three Fed officials voted to hike. That hasn't happened in the same direction since 2016.

The Fed left rates at 3.50 to 3.75% on Wednesday, the fifth meeting in a row without a move. The hold isn't the story though. The vote was 9 to 3, and Beth Hammack in Cleveland, Neel Kashkari in Minneapolis and Lorie Logan in Dallas all wanted a quarter point more, immediately. You have to go back to September 2016 to find three dissents pointing the same way, and that time they were pushing to hike while inflation was running below target, so it was the opposite problem. Kevin Warsh called the meeting a family fight. Then June core PCE landed the next morning at 3.3%, better than May but still a long way from 2%, and by Friday prediction markets had a September hike sitting around 60%.

Why you care: We told you last issue to have 20 seconds ready on this one. Here's what to say. Nobody on that committee is debating how fast to cut anymore, and three of them want to go the other way. A hike cycle prices LBO debt very differently than a cut cycle does.

Interview angle: "It was a hold, but the vote is the story. Three dissents in the same direction, first time since 2016, and all three wanted to go up. If I'm a sponsor, that hits me at the exit before it hits me at the entry. Floating rate debt reprices right away, and the exit multiple I underwrote assumed cheaper capital than I might actually get."

2. Oil ran to $90 and handed most of it back, in three sessions.

Brent closed up 7.9% at $90.74 on Wednesday after Trump said Iran "is going to get a beating," which followed weeks of Iranian attacks on tankers moving through Hormuz. WTI finished at $84.46. Friday managed to do both things at once: Brent touched $93.31 while Washington and Tehran were trading strikes, then gave it back and settled down 1.9% at $89.03 once Saudi Arabia floated a naval coalition to protect shipping, with 14 countries signing on. For reference, Brent was above $98 on July 23. It sold off on peace talk, came most of the way back, and crude still finished the month higher than it started.

Why you care: Energy is one of the only sectors where the macro headline is the deal driver, and inside a bank it cuts both ways. Traders had a great Wednesday. Bankers didn't, because nobody signs a purchase agreement off a curve that's moving eight percent in a session.

Interview angle: "Volatility matters more than the level here. At a steady $90 you get deals done, because both sides are underwriting the same strip. When Brent swings from $89 to $93 inside one session, the bid-ask gaps out and processes stall. That's why an oil spike shows up in trading revenue well before it shows up in energy M&A."

3. A $644B credit manager wants to buy a buyout firm, because it can't raise its way into private equity.

The FT reported this week that Ares has held early talks about buying Leonard Green and Partners, the LA mid-market firm running $85 billion. Nothing is signed, and these things fall apart all the time. What makes it worth reading is the shape of Ares. It manages $644 billion, but more than 65% of that is private credit and another 22% sits in real assets. Private equity is about 4%, built off four funds since 2012 that raised under $20 billion between them. Leonard Green would take Ares from roughly $26 billion of PE to north of $110 billion overnight, which is a decade of fundraising you'd otherwise have to actually go do.

Why you care: Manager buying manager is one of the busier corners of the Street right now, and it makes you value something you've probably never modeled. There's no portfolio company at the end of this one. You're paying for a fee stream and for the people who produce it.

Interview angle: "Ares is the biggest private credit manager in the world and close to a nobody in its own PE business. You can spend another decade and four funds fixing that, or you can write a check for $85 billion of it. Price isn't the hard part. In a GP deal the asset goes home every night, so most of the negotiating is carry, vesting and who's actually locked in."

Deals of the Week

The $55B Electronic Arts buyout cleared its last hurdle and closes Tuesday. It's the largest LBO ever recorded. EA said Thursday that every regulatory approval is now in hand and that it expects to close on or about August 4. CFIUS was the last gate, which is about what you'd expect when a sovereign wealth fund takes control of an American company. We covered the EU piece last week, so this is the finish line. The deal was struck back in September 2025 at $210 a share with roughly $20 billion of committed debt behind it, and Saudi Arabia's PIF comes out the other side holding 93.4%, up from around 10% today. EA has been public since January 1989. It takes the LBO record off TXU, which had held it for nineteen years.

Buy-side (PIF, Silver Lake, Affinity Partners): J.P. Morgan (financial); Kirkland & Ellis (lead consortium and PIF), Gibson Dunn (PIF), Latham & Watkins and Simpson Thacher (Silver Lake), Sidley Austin (Affinity Partners) (legal)
Sell-side (Electronic Arts): Goldman Sachs (financial); Wachtell, Lipton, Rosen & Katz (legal)

Goldman's PE arm is buying Numantec at about 700 million euros, and Goldman's bankers are advising Goldman. Goldman Sachs Alternatives agreed on Monday to take majority control of Numantec, an Italian maker of infusion devices and drug delivery products, buying it from White Bridge Investment. Around 600 employees, seven plants across Europe and the US, closing sometime in Q4. It's sponsor to sponsor: White Bridge assembled the business through bolt-ons around a 2021 investment in Delta Med, and is handing the finished version to a bigger fund. Worth reading the advisor list twice. Goldman's own investment bank is advising Goldman's PE arm on the buy-side, and the seller went out and hired J.P. Morgan.

Buy-side (Goldman Sachs Alternatives): Goldman Sachs International, Investment Banking Division (financial); Bain, Deloitte (diligence); Latham & Watkins, Linklaters, A&O Shearman (legal)
Sell-side (Numantec and White Bridge Investment): J.P. Morgan (sole M&A financial advisor); Houlihan Lokey (debt advisor); White & Case, Giovannelli e Associati (legal)

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