Leverage multiples for large European buyouts have reached a new five-year peak, according to Thomson Reuters.
The average total leverage multiple reached 5.75x on large buyouts (those with debt packages in excess of €500 million) in the second quarter, Thomson Reuters said. It was the highest quarterly average since Q1 in 2008 when they reached 6.08x, shortly before Lehman Brothers collapsed and precipitated the financial crisis. The rise in multiples has been rapid; in the fourth quarter last year, the average stood at 4.25x.
The high water mark was reached by CVC Capital Partners’ acquisition of Ista in April. The €2 billion debt package underpinning the €3.1 billion buyout equated to a leverage multiple of 7.25x, Reuters said.
Two recent examples of highly-geared deals are German publishing group Springer Science & Business Media and ceramics business CeramTec, both of which had debt to EBITDA multiples of 7x. Packaging business Rexam is also expected to have gearing in excess of 7x.
Europe remains a highly liquid market, fuelled in part by CLOs putting capital to work before their reinvestment periods expire, but also by private debt funds seeking to deploy capital. Investment banks, despite regulatory pressures, also continue to pursue leveraged loan opportunities, meaning sponsors have been able to raise significant amounts of debt financing for large deals.