Mergermarket and Debtwire: Overview of Western Europe Buyout and Financing Trends 2020

January 27, 2021

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

Highlights from the report include:

• Private Equity activity accelerated towards the end of the year, recording 301 buyouts with disclosed value of EUR 41.2bn in 4Q20, bringing the annual deal count figure in Western Europe to 942 deals, 10% down from 2019. (1,040 deals).
• Despite the slight decrease in the number of deals, the region recorded overall buyout value of EUR 126.7bn for 2020, up 7.8% from last year and the largest annual figure since 2007.
• Western European leveraged loan issuance backing buyouts declined by 4% to EUR 37.3bn in 2020, with the number of loan financings recorded experiencing a much more pronounced drop of 33% as the pandemic negatively impacted deal making activity.
• High yield bond issuance backing LBOs shifted higher in 2020, though it was driven by one deal, namely the ThyssenKrupp Elevator financing completed in the second quarter.
• The share of deals levered 6x or more increased to 46% in 2020 from 35% in 2019, though there was a decrease in transactions at the upper end, with 8% of deals levered 7x or more in 2020, down from 12% in the prior year.
• Primary market loan pricing on LBOs jumped in 2Q20 as the pandemic prompted a repricing of risk, with weighted average margins climbing to 441bps from 379bps in the first quarter before steadily tightening thereafter, with average margins falling to 419bps in 4Q20. Likewise, average OID’s (original issue discounts) spiked to an average discount of 263bps in 2Q20, before retreating to a more modest 138bps in the fourth quarter on the back of robust lender appetite.
• Technology remained the most targeted space for buyouts throughout the year, recording 230 deals worth EUR 19.3bn, 19.2% up in volume from 2019. The Industrials & Chemicals sector took nearly a quarter of the overall buyout value with EUR 32.7bn across 166 deals for the year, the highest annual value on record. The overall deal value in the Financial Services sector has grown 3x to EUR 10.9bn across 51 deals in 2020.
• After tumbling by roughly 20 points in 1Q20 as the coronavirus pandemic spread and lockdown measures began to take effect, secondary market loan prices have since recovered most of the ground they lost, with the average bid on sponsored loans now at 96.43, just one point below the pre-pandemic average.