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LBOs Share of U.S. M&A Proceeds at Multi-Year Low

With the aggregate deal value of announced U.S. M&A transactions hitting record levels this year as strategic acquisitions dominate the deal landscape, the share of private equity deals relative to total M&A is moving in the opposite direction. 

A review of the share of transactions identified as leveraged buyouts in relation to all deal activity conducted by the Global Markets Intelligence (GMI) research unit of S&P Capital IQ finds that just 3.5% of the $1.8 trillion in announced deals are LBOs. 

That places 2015 on track for the third consecutive year where LBOs share of total announced M&A deal value has shrunk. Also, with just 3.5% of this year’s deal value coming from LBOs, the share of private equity purchases is at its lowest point since 2000 when LBOs accounted for 2.7% of that year’s $1.72 trillion in deals.

Indicative of the condition of LBO activity this year has been the drought of large deals. To date this year, just twelve LBOs were valued at $1 billion or greater. That compares to 2014 full-year results which 28 announced LBOs of $1 billion or greater.

Furthermore, this year is on track to see the fewest number of billion-dollar plus LBOs since 2009 when six were announced.  Additionally, while the number of strategic M&A deals of $10 billion or greater is seeing a record number this year with 34 such deals, the last time U.S. LBOs of over $10 billion occurred was in early 2013 when Michael Dell and Silver Lake Partners signed a definitive merger agreement to acquire Dell Inc. (NasdaqGS:DELL) for $20.5 billion in cash on February 5, 2013 and 3G Capital Management, LLC and Berkshire Hathaway Inc. (NYSE:BRK.A) entered into a definitive merger agreement to acquire H. J. Heinz Company (NYSE:HNZ)  for $23.4 billion in cash on February 13, 2013.

The year’s top announced US LBO involves The Carlyle Group LP (NasdaqGS:CG), GIC Pte. Ltd. and other co-investors entering into a definitive agreement to acquire Veritas Technologies Corporation from Symantec Corporation (NasdaqGS:SYMC) for $8 billion in cash on August 11, 2015. That was followed by Lone Star Funds entering into a definitive agreement to acquire Home Properties Inc. (NYSE:HME) in a transaction valued at $7.2 billion on June 22, 2015. Still, with cash reserves, or so-

With the aggregate deal value of announced U.S. M&A transactions hitting record levels this year as strategic acquisitions dominate the deal landscape, the share of private equity deals relative to total M&A is moving in the opposite direction.  A review of the share of transactions identified as leveraged buyouts in relation to all deal activity conducted by the Global Markets Intelligence (GMI) research unit of S&P Capital IQ finds that just 3.5% of the $1.8 trillion in announced deals are LBOs. 

That places 2015 on track for the third consecutive year where LBOs share of total announced M&A deal value has shrunk. Also, with just 3.5% of this year’s deal value coming from LBOs, the share of private equity purchases is at its lowest point since 2000 when LBOs accounted for 2.7% of that year’s $1.72 trillion in deals.

Indicative of the condition of LBO activity this year has been the drought of large deals. To date this year, just twelve LBOs were valued at $1 billion or greater. That compares to 2014 full-year results which 28 announced LBOs of $1 billion or greater. Furthermore, this year is on track to see the fewest number of billion-dollar plus LBOs since 2009 when six were announced. 

Additionally, while the number of strategic M&A deals of $10 billion or greater is seeing a record number this year with 34 such deals, the last time U.S. LBOs of over $10 billion occurred was in early 2013 when Michael Dell and Silver Lake Partners signed a definitive merger agreement to acquire Dell Inc. (NasdaqGS:DELL) for $20.5 billion in cash on February 5, 2013 and 3G Capital Management, LLC and Berkshire Hathaway Inc. (NYSE:BRK.A) entered into a definitive merger agreement to acquire H. J. Heinz Company (NYSE:HNZ)  for $23.4 billion in cash on February 13, 2013.

The year’s top announced US LBO involves The Carlyle Group LP (NasdaqGS:CG), GIC Pte. Ltd. and other co-investors entering into a definitive agreement to acquire Veritas Technologies Corporation from Symantec Corporation (NasdaqGS:SYMC) for $8 billion in cash on August 11, 2015.

That was followed by Lone Star Funds entering into a definitive agreement to acquire Home Properties Inc. (NYSE:HME) in a transaction valued at $7.2 billion on June 22, 2015. Still, with cash reserves, or so-called dry powder, held  by global buyout funds approaching $500 billion according to industry sources, the resources for deals is available. Whether action will be taken remains to be seen.

 LBOs Activity Relative to Overall M&A

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