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LPC: Private Equity Firms Put More Capital, Less Debt Into LBOs

August 29, 2016, 08:02 AM
Filed Under: Industry News

A Reuters article notes higher company valuations and lenders wary of risky investments are pushing private equity firms to increase the size of equity contributions, or checks, for leveraged buyouts near historic highs in the face of fierce competition from cash-rich corporate buyers.

The average equity contribution during the second quarter was 45.7%, the highest level since the first quarter of 2012 when the average reached 46.1%, according to Thomson Reuters LPC data. The all-time high was in 2009 when sponsors had to pay an average of 50.3% of the purchase price.

Comparatively, in 2007 equity checks averaged in the low 30% area, making the return on investments more lucrative Reuters reports.

Despite the fact that valuations remain at historic highs, the number of quality deals to choose from is limited which is intensifying an already highly competitive dynamic between strategic buyers and private equity sponsors.

View the entire Reuters article Private equity firms put more capital, less debt into LBOs.

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