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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.
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.
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. Competition between banks and direct lenders is reaching a fever pitch in other deals, too. Jefferies Financial Group Inc. KKR & Co.
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.
The proposed amount of funded debt from private lenders would be significantly higher than seven times PowerSchool’s earnings, according to Bloomberg’s sources, which banks may struggle to match due to regulatory constraints.
This is an interesting strategy, and has helped Ares earn a positive reputation among businesses that often go overlooked by large investmentbanks. By contrast, Ares has the ability to complete much more sophisticated deals, including leveragedbuyouts.
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%.
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.
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.
This is an interesting approach because Ares tends to work with businesses that may be perceived as too risky for other BDCs or may not fit the ideal client profile for an investmentbank. At a P/B of 1.05, Ares is trading right in line with its 10-year average.
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.
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.
Lately, much attention has been lavished on Ares Capital, the unit created in 2004 to provide financing for middle-market acquisitions, recapitalizations, and leveragedbuyouts. The amount of business that banks do with us now is more than it has ever been.” In 2022, Ares’ direct lending tied to such buyouts totaled $26.4
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.
SCP provides public and private companies with capital for purposes of growth, recapitalization, and leveragedbuyouts. SCP identifies opportunities to work with industry-leading management teams with a long-term perspective. For more information, see www.stephenscapitalpartners.com. Stephens Inc.
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.
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.
That whole distressed debt department at city 00:06:31 [Speaker Changed] Banks are wanting to sell? I work for a really senior guy in the investmentbank. But because these are really good businesses, which got levered, they got leveraged through these leveragebuyouts. There’s leverage.
The investmentbanks were stuck with syndications that they had committed to, to place in the markets with price caps on the, on the coupons. Another floating ra, another interest rate sensitive asset class or LBOs, highly levered leveragedbuyouts supported by floating rate liabilities. That’s an example.
“On things like NAV loans and margin loans, it’s just additional leverage and if things go against you, you can have a problem,” Stavros, KKR’s cohead of global private equity, said at the Berlin event. Many were acquired at the buyout boom’s zenith in 2021 and 2022, and often paid for by piling them up with floating-rate debt.
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.
So, I graduated from business school in 1987 and went to GE Capital for two years, financing leveragedbuyouts. I mean, you know, I probably shouldn’t have been doing it because I had been a journalist covering public schools and knew nothing about leveragedbuyouts. And I actually started out of business school.
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.
Leveragebuyouts requires leverage. And when rates were so low, the leverage went, it was cheap and, and and easily accessible. If you look at the m and a volumes at at most of the major investmentbanks, including at Raymond G’s volumes came down. But also it helped private equity do deals, right?
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