Just like old times?

While one may think that the buyout machine is beginning to hum once again, it is really the increased activity at the top end of the market that is adding some sparkle to the value totals, while small- and mid-cap volumes remain rather ordinary.

It is true that debt availability to fund buyouts has improved, although banks remain wary of taking on larger debt holds. In fact, at the lower end of the market, relying on a club of banks to provide financing remains common practice. At the larger end however, a thriving high yield market has reinvigorated deal doing as large transactions can rely on the bond market to provide the necessary leverage. The low interest environment has seen investors pile into the high yield market in search of greater returns.

What is more, in the absence of major defaults so far, the European high yield market has remained open and is showing what is - for Europe - atypical stability. Buyout houses for their part are making the most of it.
Last month saw CVC leverage its CHF 3.3bn acquisition of Swiss telecommunications provider Sunrise with CHF 2.3bn of senior debt - two-thirds of which was being converted into a bond. It is little wonder then that buyouts at the top end of the market are making a comeback.

Of course deal doers will always look to find a way to structure deals, but there are not many that would have predicted a steady flow of mega buyouts already in the second half of 2010.

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