'Vultures' circle as turmoil offers bargain-price firms

Cash-rich financiers including Warren Buffett, Wilbur Ross and Ron Perelman are preparing to pounce on US companies hit by the financial turmoil - moves that could herald a new era of "vulture investing".

After years pushed to the sidelines by high valuations and fierce competition from private equity, so-called "value" investors believe the financial and capital market crisis now offers a great opportunity to buy companies at bargain prices.

Mr Ross, who is considering either buying into one of the troubled monoline insurers, which insure against bond defaults, or setting up a new one, said the turmoil provided an embarrassment of riches. "Nowadays so many things are starting to come unglued that the real problem is sorting out what the real opportunities are," he said.

In a recent note to clients, credit-rating agency Standard & Poor's said that, as the number of ailing firms in sectors ranging from brokerage and banking to media and consumer products grows, "vultures begin to stir".

Mr Ross, who has made millions by restructuring troubled companies in out-of-favour industries such as mining and car parts, yesterday announced the closing of a $4 billion (€2.7 billion) fund to "invest in and restructure financially distressed companies".

He said his next moves were likely to be in insurance, mortgage servicing and car parts.

Mr Buffett, who has been lamenting the lack of takeover targets for several years, has struck deals worth a combined $6 billion over the past few months. But he is widely believed to be still looking to spend the $40 billion cash-pile held by his Berkshire Hathaway conglomerate on a large financial or industrial firm.

"This is Berkshire's market. When you have this kind of sell-off in equity markets and the capital Berkshire has, things will happen," said Mohnish Pabrai, a California-based asset manager who owns shares in Berkshire.

Mr Perelman, who has assembled businesses ranging from Revlon cosmetics to Allied Barton security service by taking over companies in distress, said he regarded the current conditions as a "buying opportunity".