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Investmentbanks, which faced significant losses on risky merger and acquisition (M&A) loans due to a spike in global interest rates, are now aggressively returning to the leveragedbuyout (LBO) market — one of the most profitable sectors in finance, according to a report by Bloomberg.
The report cites unnamed sources familiar with the matter as revealing that the private equity firms have started consulting with investmentbanks in preparation for a potential sale process, expected to begin in early 2025.
Wall Street banks including JPMorgan Chase & Co. and Bank of America Corp. are in talks to provide as much as $8 billion in financing for a buyout of DocuSign Inc. Representatives for JPMorgan, Bank of America, DocuSign, Jefferies, Deutsche Bank, Bain and Hellman & Friedman declined to comment.
While Hercules and Horizon typically compete for the same business, Ares is slightly different because it focuses on middle-market companies that may fall off the radar of investmentbanks and other BDCs. The company's superior reputation and generous returns have attracted some of the largest investors in the world.
Private credit lenders and banks are vying to offer debt financing for a potential acquisition of US education software provider PowerSchool Holdings, according to a report by Bloomberg citing people with knowledge of the matter. Banks are also said to be offering competing packages that include a smaller amount of debt and preferred equity.
Rather, many of the companies in Ares' portfolio are lower middle market businesses that go overlooked by investmentbanks or private equity investors. ARCC Price to Book Value data by YCharts At a price-to-book (P/B) ratio of just 1.1, Ares stock is trading essentially in line with its 10-year average.
The industry growth is being driven by investmentbank caution around underwriting leveragedbuyouts given volatile market conditions. Blackstone, meanwhile, is helping fund the combination of New Mountain Capital’s HealthComp Holding Company LLC and Marlin Equity Partners’ Virgin Pulse.
Leveragedbuyout financings accounted for almost half (42%) of all UK transactions in H1 2024, compared with just 29% in H1 2023, according to the latest MidCapMonitor report by global investmentbank Houlihan Lokey.
You might be wondering what makes Hercules stand out from a traditional bank. Well, banks may pass on making loans to start-ups given their risk profile as money-burning businesses. This is an interesting strategy, and has helped Ares earn a positive reputation among businesses that often go overlooked by large investmentbanks.
There are many companies in need of capital or advisory services, but they are not big enough or deemed suitable by investmentbanks. This is where Ares comes into the equation. Like Hercules, Ares also has a low nonaccrual rate of just 1.7%.
Unlike a traditional bank that may pass on a start-up due to its risk profile, Hercules specializes in term loans and other debt structures for venture-backed companies. However, the catch is that this debt typically carries a much higher interest rate than a loan from a bank. This is where Hercules can add value.
So the current business climate — bedeviled by climbing interest rates and tighter access to bank loans — has Ares Management CEO Michael Arougheti champing at the bit. “We As the Federal Reserve Bank ratchets up interest rates, Ares Cap monitors borrowers’ balance sheets for any signs of stress.
Winter focuses on cross-border and UK acquisition finance and restructurings, advising investmentbanks, alternative credit providers, corporate borrowers and private equity sponsors on various debt capital structures in the European large-cap and mid-cap markets.
Ultimately though, whether a record $10bn+ deal is agreed or not, depends on how well investmentbanks, the traditional source of finance for leveragedbuyouts, manage to regain the ground they have lost to private lenders over the past 18 months or so, said Hirschmann.
Historically, the focus was on leveragedbuyouts and cost-cutting to boost profitability, but this approach is no longer sufficient. With over 15 years of experience in investmentbanking, asset management, and private equity, Lou helps align Zanders’ value proposition with investor value creation strategies.
Dee Kuchukulla (New York) guides leading private equity sponsors and their portfolio companies on an array of complex transactions, from leveragedbuyouts and sales to carve-outs, cross-border deals, joint ventures, and take-privates across industries. She brings a deep understanding of technology and consumer brands.
Prior to joining JMI, Larry was an analyst in the multi-industries group in the investmentbanking division at Merrill Lynch & Co. Suken is responsible for sourcing and evaluating investment opportunities as well as providing strategic and operational support to portfolio companies. Suken Vakil , Partner, joined JMI in 2012.
Bank Street Group LLC served as exclusive financial advisor and Latham & Watkins LLP and Maynard Nexsen served as legal counsel to Lit Communities and existing equityholders in connection with this transaction. SCP provides public and private companies with capital for purposes of growth, recapitalization, and leveragedbuyouts.
And that was very important because when this was the dawning of what is now a big analyst program across the country in all banks and investmentbanks. There was no m and a departments in any investmentbank really until the very late seventies. And I was fortunate to be accepted to both.
Bloomingdale’s filed for bankruptcy, S-C-I-T-V filed for bankruptcy, and for the first time banks, which owned the debt, wanted to sell. At the time, you’re early in your career, you have some experience, and an MBA when, when you first started hearing that from banks that, Hey, we got all this Bloomingdale debt.
And what was interesting was the first leveragedbuyout of a public company happened when I was in graduate school. KLINSKY: In 1979, it was the first leveragedbuyout of a public company. We had sold the family business, maybe buy another family business one day through a leveragedbuyout. KLINSKY: Yeah.
And so when I started, we were investing the A fund, you know, the cracks were there, but they weren’t wide. And then very soon after, you know, bear Stearns fails, Lehman Brothers fails, the cracks were massive and there were so much for selling from the trading desks at the banks. That had mismatched assets.
When buyout groups do look to sell, PIKs, NAV loans and other kinds of excess baggage are creating obstacles. At the same time regulators are becoming ever more fearful about what’s being hidden from view, and the threat of contagion from any private-markets meltdown to the banking system and real-economy jobs.
UK sponsor-backed financing activity experienced a modest slowdown in Q3 2024, as ongoing M&A sluggishness and seasonal dynamics impacted deal flow, according to the latest data from global investmentbank, Houlihan Lokey.
The report cites unnamed sources familiar with the matter as revealing that private credit firms, including HPS Investment Partners and Ares Management, are among those vying to finance what would be one of the largest leveragedbuyout (LBO) debt deals in over a decade.
One, two, there was a theory that these businesses had volatile cash flows and therefore couldn’t be leveraged, which was the, you know, the whole point of leveragedbuyouts. He was running the h and q investmentbank, and then Roger was my next door neighbor and very good friends with Jim.
RITHOLTZ: So, let’s talk a little bit about your career, which began as a reporter, went into M&A banking, and then went back to writing. RITHOLTZ: So, you ended up becoming an investment banker. Tell us a little bit about your banking background, what did you do, what sort of deals. It’s great to be here.
billion) funds approach to investing. After nearly 20 years in investmentbanking, at Deutsche Bank and then Credit Suisse, in 2013 he moved to Borealis, OMERS infrastructure arm, to run infrastructure globally and then head the capital markets team. We are starting to see LBO [leveragedbuyout] activity pick up again.
So my dad was a diplomat for the World Bank, grew up in Nigeria, in Lagos, in Harare, Zimbabwe, and then in Hanoi, Vietnam. Leveragebuyouts requires leverage. And when rates were so low, the leverage went, it was cheap and, and and easily accessible. You seem to have traveled a little. Where else?
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