M&A Leveraged Loan Activity Holds Steady, While Share of LBO Deals Rises

Though the volume of M&A-related institutional leveraged loan deals remained steady in 2017’s third quarter, private equity/sponsor-driven activity increased, both in absolute terms and by share of market, according to LCD.

Institutional M&A volume (including LBOs) was on par with 2Q17, at $65.6 billion, but perspective is helpful here: Prior to 2017 one would have to look all the way back to 1Q07 to find a higher volume figure. Sponsored deal volume gained for the fourth consecutive quarter, with LBOs leading the way, logging their seventh straight quarterly increase, to $36.9 billion, the highest figure since 4Q07.

At $56.5 billion in the third quarter of this year (including pro rata), private equity-backed acquisition financing is the most prominent it’s been since 2Q07, representing 70% of total M&A. And those deals are getting more expensive. Private equity firms, of course, sit atop an ever-growing mountain of dry powder—that figure could reach $1 trillion by year-end, according to Preqin—and they’re eager to put that cash to work. This has contributed to an uptick in purchase price multiples in 2017, to 10.35x for the year through Sept. 19, from 9.99x last year.—Staff reports

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