Following the abrupt change in market conditions in the second half of last year, primary activity in the debt markets has come to a near standstill and is likely to stay that way while a backlog of approximately €66bn of leveraged loans continues to languish on arranging bank’s balance sheets. Since the beginning of the year, the few deals that have been syndicated have largely comprised small to mid-cap relationship-style bank transactions.
The numbers paint a very clear picture of the continuing extent of the problem. Across the world only 102 buyouts have been completed so far in 2008, for a total value of $7.8bn. That’s down 73.2% from the $29.1bn mark this time last year, according to
M&A activity by LBO-backed portfolio companies looks marginally better, but much of this will have been paid for from portfolio company balance sheets. That figure stands at $14.6bn so far in 2008, down 69.52% from the $47.9bn worth of deals completed this time last year.
Further exacerbating conditions, the recent peak in the
The cause for the swing wider in credit default swaps was news that
This confidence will clearly also be shaken by further external shocks to the system such as the recent turmoil at
Given the congestion in the debt market, there will be precious few large deal completions. So for the moment everybody’s talking about smaller, less debt-dependent deals and the current darling of private equity – the mid-market – as the place to be which has witnessed a flurry of fund closes recently, mainly in the UK – see our feature this issue page 32.