Although the number of buyouts in Western Europe surpassed the previous quarter’s figures, it remained subdued compared to pre-pandemic levels. The region saw 189 buyouts valued EUR 18.1bn in 3Q20, a modest recovery from the prior quarter’s deal count of 162 worth EUR 13.1bn.
While activity is still in a recovery phase, the overall buyout value in 2020 nearly matches the year-on-year figure, driven by 25 deals valued over EUR 1bn, compared to 18 such transactions in 2019. The YTD buyout value stands at EUR 84bn across 595 deals, down 6% over the same period last year (EUR 89.4bn, 781 deals).
Western European leveraged loan issuance backing LBOs slipped to EUR 6.8bn in 3Q20 from EUR 7bn in 2Q20, and remains 50% below the first quarter figure. In both the loan and bond markets, 2020 issuance has been buoyed by Thyssenkrupp Elevator, the largest European buyout in a decade, in which the company was acquired by Advent International and Cinven Partners in a EUR 17.2bn transaction.
RENK’s EUR 320m financing was the only high yield bond to price in the third quarter backing an LBO. It has been a quiet year all around for Western European buyout bond financings, with only four deals pricing to date.
Margins on first lien institutional loans fell slightly to 439bps in the third quarter from the second-quarter high of 441bps, though pricing remains elevated relative to pre-COVID levels.
Technology is the most targeted sector by sponsors in volume in 2020 so far. After subdued activity in the Industrial & Chemicals space in the second quarter, 3Q20 registered 43 buyouts worth EUR 4.5bn, becoming the most active sector in the past three months. With lockdown still in place in many Western European countries, Leisure remained the most affected major sector, recording a 44% year-on-year decline in activity (14 buyouts, EUR 6.9bn in 2020 vs 25 buyouts, EUR 8.4bn in 2019).
The top sectors in terms of LBO leveraged loan issuance year-to-date are Industrial & Chemicals (EUR 9.74bn), Telecommunications (EUR 4.05bn) and Consumer (EUR 3.44bn).
Sponsor-backed term loans ended September with an average bid of 94.52, down nearly four points on average from January, but have recovered over 15 points from the 20-point drop in March.