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Middle-Market M&A Sees Double Digit Y/Y Growth in First Half

July 10, 2017, 07:59 AM
Filed Under: Mergers & Acquisitions

Mergers and acquisitions activity in the middle market hit a ten-year high in the first half of 2017, with 5,260 deals completed during the period, according to data from Thomson Reuters. As reported by Mergers & Acquisitions, that's a 12 percent increase over the 4,694 deals that closed in the first six months of 2016 -- marking the strongest first six months of the year since pre-recession 2007, when 5,478 middle-market deals closed.

Meanwhile, leveraged loan issuance was a record $732 billion during the first six months of 2017 -- easily outstripping the $381 billion posted in the first half of last year, according to Thomson Reuters' most recent Leveraged Loan report.

The previous record was in 1H13 when $660 billion of volume was recorded. The growth in lending this year continues to be driven by refinancing activity. Nearly three-quarters of all syndicated loans in the first six months were used to refinance existing debt.

“There were simply a lot of low-fee repricing and refinancing deals. These transactions boost the volume numbers, but don’t have the same impact on arrangement fees as new-money, acquisition finance loans,” Jeff Nassof, a director at Freeman Consulting Services, told Business Insider.

In addition, the share of leveraged issuance comprised of institutional loans has grown to 67% in 1H17, from 42% last year. Institutional loan issuance has surged to a new high of $496 billion in 1H17, far ahead of the $163 billion recorded in the first half last year and 26% higher than the previous record of $395 billion in 1H13.

M&A leveraged loan volume stands at $133 billion in 1H17, down from the $141 billion recorded in 1H16, Thomson Reuters reported. Non-LBO activity fell to $81 billion from $101 billion in the corresponding period last year. In contrast, LBO issuance increased to $51 billion, up 27% from $40 billion a year ago.

Middle market lending volume stands at $79 billion in 1H17, with $63 billion of issuance in the large middle market segment and $16 billion in the traditional middle-market space. Overall middle market issuance is 23% higher in 1H17 compared to last year.

There were three additional defaults recorded in June, amounting to $1.9 billion of institutional loan debt.  They were Ignite Restaurants.  ($115.3 million), Ascent Resources ($1.056 billion), and Gymboree ($760.6 million). Year-to-date, institutional loan default volume stands at $13.4 billion. The trailing twelve month loan default rate ticked up to 2%.

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