Mega LBO Deals A Thing Of The Past?

In the US, Kohlberg Kravis Roberts (KKR) has been right amongst the string of buyout firms shopping for units being sold off by larger companies in the rebound (see 'Size Doesn't Matter, PE Deal-Making Is Back,' CFW, November 16 2009). With the help of mezzanine financing, the New York-based firm acquired South Korea's Oriental Brewery from brewer Anheuser-Busch InBev last month, for US$1.8bn. However, this deal may well be the exception, rather than the rule itself, as large-scale LBO deals may soon be a thing of the past. As we begin to see an uptick in the LBO market in Europe too, it is the middle to lower-middle market that we should be keeping an eye on. Figures from PE research firm PitchBook Data tell the story: lower middle-market deals accounted for around 70% of the 407 transactions completed in the first half of 2009 by buyout funds. PitchBook added that financing for new deals is becoming increasingly available as equity and debt markets stabilise. In addition many PE houses remain heavily under-invested, awaiting more attractive valuations before striking-up deals.

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