Leveraged Buyouts Are Starting To See More Action


Private equity firms are looking to get value in sectors such as live entertainment, travel, retail and energy.

While the first half of the year saw very little movement as far as leveraged buyouts, However, the 3 months ending Sept. 30 saw $146 billion of new deals completed globally. Despite the rebound, the first nine months of 2020 have had the lowest buyout volume since 2016, when $227.1 billion of transactions were announced during the first nine months of the year. In the opening weeks of the fourth quarter, $17.4 billion of buyouts have already been announced.

Its reported that $2.65 trillion of cash waiting to be invested in private markets, with nearly two-thirds of that set aside for private-equity deals.

In August, Blackstone Group announced a deal to buy Ancestry for $4.7 billion, including debt, from a group led by Silver Lake. Later that month private-equity firm Clayton Dubilier & Rice LLC said it would buy Epicor Software Corp. from KKR also for $4.7 billion, including debt. KKR struck a deal the following month to buy 1-800 Contacts from AEA Investors for more than $3 billion.

“There’s been a definite push in sectors that were recovering and where it felt like there was economic stability,” said John Cokinos, co-head of leveraged finance at RBC Capital Markets.

RBC co-led a financing for CD&R’s $4 billion deal to buy the construction and industrial business of HD Supply Holdings Inc., known as White Cap.

Among the biggest was Thoma Bravo LP’s $11 billion deal to sell mortgage-software company Ellie Mae Inc. to New York Stock Exchange owner Intercontinental Exchange announced in August.

Firms started licking their chops when the turmoil from the pandemic hit the markets. It was thought that the expected dips in the market would create great opportunities to get value. However, thanks in large part to the Federal Reserve that flooded the market with liquidity, stocks have largely continued to charge higher ever since.

There were some firms able to seize the moment, including Silver Lake and Apollo Global Management by providing rescue financing to companies including Airbnb Inc. and Expedia Group .

For private-equity firms exited $131 billion of deals in the third quarter, compared with $19.6 billion in the second quarter and $95.9 billion a year earlier.

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Economics, Finance and Investing