Will growth continue in 2018?
In the last 5 years, new financing leveraged buyout (LBO) loans saw the highest year-on-year growth in 2017, with volume up 38% globally. Region-wise, not only was Americas volume strong, but the number of deals also increased—up 42% to 310 deals in 2017 from 218 in 2016. In EMEA and Asia Pacific, though activity fell from 2016 to 2017, volume surged by 46% and 73%, respectively, thanks to growth in average deal size.
After an exceptional 2017, new LBO loans globally have fallen 20% year-on-year to $26.5bn (via 60 transactions) this YTD. However, the pipeline is building. Volume for such deals that have been announced but not yet signed totals $23.1bn.
LBO pipeline is building up in the US
The LBO pipeline is promising with deal volume of $19.0bn already announced in the US. By sector, publishing takes the lead with 46.0% of volume (due to Thomson Reuters’ upcoming $8.7bn loan). In second place is technology with 18.4% of volume, followed by machinery with 10.5%.
A total of $494.1bn in new LBO loans will mature by 2026 globally. With an average tenor around 5.9 years, such debt has created a peak in 2022, when $84.7bn of debt will mature.
As a result of growth in both volume and average deal size in 2017, LBO loans signed last year built up a debt tower in 2024. Out of the $119.0bn due that year, the technology sector has the highest share (17.6%), followed by healthcare (14.1%) and professional services (12.7%).
With this new debt tower, the market will likely see two massive refinancing waves in the next few years.
– Written by Szilvia Farkas, Dealogic Research
Data source: Dealogic, as of March 8, 2018