Concern over EBITDA multiples

Highly leveraged deals have rapidly increased in number, and investors should be concerned.

The proportion of mid-market leveraged buyouts with high levels of leverage has increased dramatically over the past five years according to Thomson Reuters LPC data.

Deals levered by at least 6x EBITDA have increased more than five-fold since 2012, while even riskier deals of 7x or more have also increased three-fold as a proportion of all leveraged buyouts.

These high levels of leverage may give investors pause for thought about the risks they could be taking on with mid-market lending. Ensuring covenants and termsheets are solid will be important to ensuring debts can be recovered when the next economic downturn comes along.