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YTD growth in new M&A financing

The long-awaited spree for new M&A financing is burgeoning. With global volume YTD reaching $417.5bn across both loans and DCM—trending 29% above 2017 YTD figures—fixed-income bankers have been enjoying wallet contributions from bigger deal sizes. So far this year, M&A-related debt deals generated a total revenue of $3.2bn via 398 deals (compared to $3.3bn via 462 in 2017 YTD). Leveraged finance was unsurprisingly the key driver for such deals, with a 62.5% share of revenue paid this YTD.

In particular, M&A-related loans volume grew by 13% year-on-year to $315.9bn this YTD. Growth from investment-grade borrowers and jumbo deals over $1bn have been noticeable features of the market.

IG borrowers join the party

After shying away from M&A financing in recent years, 2018 saw the return of investment-grade borrowers to the loans market with a 60% jump in volume from $119.8bn in 2017 YTD. This brought 2018 YTD volume for such deals to $192.0bn, the highest figure since the financial crisis ($206.5bn in 2008 YTD).

Comcast’s $22.3bn bridge facility for their bid to acquire Sky plc is the latest household name to tap the market for jumbo financing. Such $1bn+ facilities have become common in the IG loans market, where they accounted for 94.0% of new M&A-related volume in the Americas and EMEA this YTD.

New M&A-related Loans YTD

Jumbo loans the new normal

Across both investment-grade and leveraged loans for financing new M&A globally, the growth of jumbo deals has led to a year-on-year increase in average deal size—to $943m this YTD from $687m. The mushrooming of jumbo deals in this sphere coincides with a noticeable increase in the valuation of companies, which saw M&A EV/EBITDA jumping to 15.3x this YTD, the highest since full-year 2015 (15.9x). With a healthy pipeline in place, 2018 could finally be the year of new M&A financing.

YTD M&A-related Jumbo Loans vs. M&A Valuation


– Written by Roody Muneean
Data source: Dealogic, as of May 1, 2018

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