Private-equity firms have a record $1.6 trillion of unspent cash, ready to deploy in pricey buyout deals, according to the Wall Street Journal. The record reflects bigger funds seeking larger buyouts to distinguish themselves from the competition.
Analysts also link the rise in leveraged bids to buy out firms attempting to woo investors by giving them an opportunity to invest directly in target firms and avoid fund fees.
The notable pending deals include CVC Capital Partners proposal of more than $20 billion for Toshiba Corp.
Buyout deals were popular between 2005 and 2007, when private-equity firms created 18 deals, valued at over $10 billion.
Many such deals struck before the financial crisis generated average earnings, pushing some firms into bankruptcy protection filings.
Regulators have discouraged banks that make buyout loans from financing deals in which debt is above six times EBITDA.
Two-year trailing average purchase-price multiple hit a record 12.8 times Ebitda in 2020, up from 9.4 times in 2007.
