How would investors have fared buying the lbos of 1988 that returned to the public arena?
Third-quarter multiples for large LBOs hit 9.6x, up from 7.9x in the second quarter.
With financing costs down, however, rising debt multiples have not sliced cash-flow coverage for new LBOs.
In the 1980s LBOs supposedly were throwing people out of jobs and bankrupting established firms.
Those provisos protected him from the worst of two troubled Apollo LBOs, Linens 'n Things and Claire's Stores.
Yet the soundly structured companies and LBOS went on paying interest and selling paper and groceries and shoes.
And they changed the name of what they did to leveraged buyouts (LBOs).
Thus, the average purchase multiple of new LBOs in the third quarter was 9.1x, versus 7.9x in the second quarter.
Look at the hundreds of millions they lost when those bridge loans to LBOs went bad in 1989 and 1990.
There is no capital available for LBOs at any rate of interest.
Middle-market purchase-price multiples for LBOs dropped further in the third quarter, averaging 7.2x, down from 8.3x in the second quarter, according to LCD.
Still, Lanin notes, private equity moguls and their investors are not able to profitably exit businesses they acquired in mega-LBOs earlier this decade.
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But for most of last year, the LBO financing market was exuberant, and early in the year people were predicting lots of large LBOs.
Taken together, the improving dynamics of the debt markets will make the economics for LBOs more attractive, which will support increased deal activity in 2011.
The Grimm statistic also does not include what you might call partial LBOs like Unocoal's in which corporations pile on debt to buy their own shares.
The graph below shows how much the retirement of equity (via buybacks, LBOs and merger activity) exceeds the issuance of equity (through offerings of new shares).
Since 1979, the small growth companies we track for our 200 Best list have undergone a myriad of transformations: LBOs, mergers, bankruptcies, name changes, ticker changes.
Since many of the fund's holdings are the result of private equity LBOs, Keenan often finds himself in tricky negotiations with the likes of Blackstone and Apollo.
For one thing, beyond the immediate calendar, participants say that front-end activity for new LBOs has waned, suggesting that new-issue supply may be headed lower in April.
Next came a two-year stint at Citicorp in New York, where he worked on mergers, acquisitions and lbos, followed by two years in London with investment bank Schroders.
None of those mega-LBOs have an exit on the horizon.
FORBES: Dell Unique Among Mega-LBOs; Silver Lake Takes Back Seat
Indeed, the average ratio of pro forma EBITDA less capex to cash interest of third-quarter LBOs only decreased marginally, to a still-healthy 2.4x, from 2.6x in the second quarter.
Heinz will take on USD 12bn in debt in the deal, which is 42% of the deal value, compared to 60% to 70% or more in most large LBOs.
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Fifteen of the 20 largest LBOs ever have been announced since early 2005, and huge club deals among rival firms are becoming more common despite the government's scrutiny of the practice.
By contrast, multiples for large-corporate LBOs jumped again in the third quarter, with private equity firms chasing after public companies, which have seen their stock prices soar over the past year.
LBOs beloved by private-equity firms, are highly attractive.
The swashbuckling 1980s, that decade of awakened shareholder activism, raiders, LBOs and Milken's junk bonds now looks like a prim decade, just as the sex revolution of the 1920s was a blush beside what followed.
Record-low borrowing costs in the market for junk bonds, where LBOs are financed, is combining with rising confidence in the financial system to boost bets that a successful Dell deal will be followed by others.
FORBES: An LBO To Take Apple Private: Who Would, Or Could, Do This?
The increase in the amount of leverage that PE investors were able to bring to the financing of LBOs and the softer covenants attached to it in 2010 should continue throughout this year, provided investor demand remains buoyant.
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