US Buyout And Financing Trends For 1Q21

Updated on

Mergermarket and Debtwire released a comprehensive overview of US buyout and LBO financing trends, including extensive advisory league tables.


Q1 2021 hedge fund letters, conferences and more

Highlights from the report include:

US Buyout Activities In 1Q21

US buyout activities in 1Q21 hit the highest quarterly record for both deal value and deal count, with a total of USD 161bn invested over 485 deals. This represented a 49.7% increase by deal value compared to the previous quarter (USD 107.6bn, 432 deals).

Leveraged loan and high yield bond issuance supporting buyout activity failed to keep up with lender demand in the first quarter of 2021. Leveraged loans backing buyouts decreased 13% from the year-ago figure to USD 32.5bn (excluding direct lending transactions), while high yield bonds backing LBOs, at USD 4.1bn, are even with the year-ago level.

As a result of the supply-demand imbalance, pricing was driven tighter in both the loan and bond markets. First lien institutional loan pricing on LBOs fell to its lowest level since 1Q20, with an average margin of just 372bps, and high yield bond pricing was similarly squeezed, falling to 5.95% from 6.07% in the fourth quarter.

At 97.81, the secondary market average bid on sponsored loans has recovered all of the ground lost last year and is up roughly 105bps on the year.

Buyout fundraising activities continued at a stable pace in 1Q21, with a total of 51 closed buyout funds raising USD 85.5bn, a 2.9% increase versus total amount raised in 1Q20 (USD 83.1bn via 50 closed funds).

Technology Sector Remained The Hottest

Technology remained the hottest sector in 1Q21, recording a total of 135 deals worth USD 44.3bn, achieving a 90.1% jump in deal value compared to 1Q20 (USD 23.3bn, 110 deals).

Technology sector borrowers tapped the markets for USD 8.1bn in debt across eight deals in 1Q21, followed by industrials and chemicals (USD 7.6bn across nine deals) and real estate (USD 4.0bn from one deal).

Consumer became the biggest winner by deal value growth. A total of USD 14.9bn was invested into the sector by sponsors through 41 deals, nearly an 8.5x increase compared to 1Q21 (1.6bn, 22 deals).

Many of the industries hit hardest during the coronavirus pandemic such as transportation (up over 8 points since 31 December), entertainment & leisure (up 3.86 points) and retailing (up 1.80 points) outperformed the overall market in 1Q21.