Unprecedented US issuance in European leveraged loan and high yield market

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  • Unprecedented US issuance in European leveraged loan and high yield market
  • US investment in Europe increased 108.4% in terms of value since start of 2017

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London/New York: 6 September 2017

Acuris, the leading provider of business intelligence and research for fixed income, transactions, compliance and equities, has released data from its Mergermarket and Debtwire products, indicating a significant rise in inbound debt issuance and M&A activity from the US to Europe.

Debt financing encouraging cross border M&A, already at USD 24.5 billion in 2017

The data suggests a correlation between the two, with increased cross-border M&A transactions supported by a more accommodating financing environment. Debt financing for acquisitions in Europe has already reached USD 24.5 billion in 2017, having more than doubled to USD 31.3 billion in 2016. US investment in Europe also increased by 108.4% in terms of value since the start of 2017, as compared to the same period in 2016.

'Reverse yankee' volumes reached EUR 64.9 billion in 2016, doubling 2015 levels

The cost of borrowing in USD and EUR markets has widened dramatically since 2015, with the US Fed incrementally normalizing interest rates while the European Central Bank (ECB) has maintained near-zero/negative interest rates, quantitative easing and introduced its investment-grade corporate bond buying program. US issuers have targeted European leveraged loan and high yield markets, with ‘reverse yankee’ – a specific type of bond with euro-denominated debt issued by US companies outside of the US, in this case in Europe – volumes doubling in 2016 to EUR 64.9 billion. On a year-on-year basis, 2017 volumes have been even stronger with loan issuance 31% higher and high yield bond issuance 38% higher in the year to date (YTD).

Colm Doherty, Global Head of Primary Markets Analysis at Debtwire, commented:

“The ‘reverse yankee’ trend illustrates the attractiveness of the European market for US borrowers. The large levels of available liquidity in the European market has put US borrowers in the position of being able to benefit from the increasingly robust and sophisticated European investor base.

“The strong appetite for paper from European lenders along with the low interest rate environment has contributed to borrowers obtaining tighter pricing and less restrictive documentation than in the past.”

In the YTD, US buyers have spent a record USD 178.2 billion on European targets, more than double the total spent during the same period in 2016, and the largest total through the first eight months on Mergermarket record (2001).

European targets in the Industrials & Chemicals and Technology sectors have seen the most activity at 202 deals (44%) valued at USD 68.1 billion. Headlined by Danbury-based Praxair’s USD 46 billion merger with Germany’s Linde AG, 2017 already accounts for three mega-deals (>USD 10 billion) with a combined value of USD 87.1 billion, compared to just one such deal in the same period last year valued at USD 16.2 billion.

Although the largest cross-border deals were reserved for strategic buyers, one of the biggest drivers behind the increased activity has been private equity (PE).

Taking full advantage of the low interest rate environment, US PE buyers have spent a record USD 38.6 billion on European acquisitions – not only is this almost 200% more than the total spent by PE in 2016 YTD (USD 13.4 billion), it is also more than the investment totals covering the same period in 2006 and 2007.

Sola Akinola, Global Head of Deals & Data Content at Mergermarket, said:

“Armed with a strengthened dollar in one hand and low interest rates in the other, US companies have been splurging record amounts on companies and assets in Europe. But it is not all one-way traffic, with cross-border activity on both sides of the Atlantic experiencing a surge in activity. Given the critical role technology now plays across even the most traditional of industries, the sector has seen a sharp spike in activity.

“Take US inbound activity, for example; four years ago US Technology companies accounted for only 14% of cross-border deal activity from Europe. Fast-forward to today and US technology targets make up nearly a quarter (23%) of all inbound deal flow from Europe – half of which had some form of PE involvement.”

This year also marks the first time ever that there have been more than 100 cross-border PE acquisitions of European companies at 109 – suggesting that more capital is being deployed and in larger quantities. 24% of all cross-border deals (US into Europe) were private equity backed, with nine of the top 10 cross-border technology deals being either a buyout, an add-on acquisition, or an exit. In fact, 57% of all cross-border deals in the sector have some PE involvement, including the USD 2.7 billion buyout of French security and identity solutions provider Morpho SA by Advent International.



Cross-border M&A US Debt Issuance

Cross-border M&A US Debt Issuance

Notes to editors

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