Buyout momentum paints a strong picture for issuance in 2022 | White & Case LLP


  • Buyout deal value in Western Europe hit an all-time record high by the end of 2021, more than doubling year-on-year
  • Private equity (PE) activity supported an 81% uplift in buyout loan issuance year-on-year, climbing to €66.7 billion in 2021
  • High yield bond issuance intended for buyouts reached US$15.4 billion in 2021—more than double 2020’s total

A record-breaking year for PE deal activity in Europe supported a surge in leveraged loan and high yield bond issuance for buyouts in 2021, and points to a busy year ahead.

PE deal value in Western Europe in 2021 surpassed record annual highs posted more than a decade ago. Buyout deal value in 2021 totalled US$441.2 billion, more than double the total recorded in 2020. Deal value soared, as PE firms pursued transactions to put deployment timetables that were delayed due to COVID-19 back on track and invest the €185 billion mountain of dry powder available for European deals alone.

Reopening economies and improving growth prospects encouraged dealmakers to take on deals of increasing size—according to Mergermarket data, there were more than 50 buyouts valued at more than €1 billion in Western Europe in 2021. This trend may well continue in 2022 as firms continue to make up for lost time and capitalise on new opportunities.


PE activity supported an 81% increase in buyout loan issuance in 2021, year-on-year

Buoyant buyouts boost debt markets

As PE deal activity has rebounded and managers backed more mega-deals, leveraged loan and high yield bond issuance for buyouts has also bounced back, despite the pandemic’s ongoing disruption with the emergence of the Delta and Omicron variants.

Leveraged loan issuance for buyouts in Western and Southern Europe climbed 81% year-on-year, from €36.8 billion in 2020 to €66.7 billion in 2021.

High yield bond issuance for buyouts has been even more robust, doubling its 2020 tally to reach €15.4 billion in 2021. Both leveraged loan and high yield issuance intended for buyouts had already cleared the full year 2020 total by the end of Q3 2021, according to Debtwire Par.

The higher volume of €1 billion-plus deals in 2021, including jumbo transactions such as the €12 billion take-private of UK supermarket retailer WM Morrison by Clayton, Dubilier & Rice (CD&R), has proven especially beneficial for European leveraged finance activity levels.

With average EBITDA multiples for median buyouts across all sectors rising from 12.3x in 2020 to 12.8x in 2021, according to Mergermarket, large deals like the CD&R/Morrisons tie-up will see a series of multibillion-euro debt packages come to market for financing.

This combination of higher valuation multiples and a rising number of jumbo deals in Europe is significant for lenders. Even though total leverage ratios in European debt structures have held steady in the 5.1x to 5.7x EBITDA range going back to 2017, the absolute amount of debt that PE dealmakers require to fund their structures increased in line with higher entry valuations and bigger deal sizes.

Buyout issuance in Western and Southern Europe also accelerated through the year, as refinancing activity cooled following a frenetic first half of 2021. European refinancing loan issuance, for example, climbed more than four-fold between Q4 2020 and Q1 2021, as a cluster of borrowers saw the strong lender appetite in the market and moved quickly to refinance existing debt packages at lower rates.

Moving into the second half of the year, however, refinancing issuance slowed, dropping by approximately a third between Q2 and Q3 2021. A gradual rise in pricing also made refinancing less appealing through the course of the year—average margins on first-lien institutional loans in Europe climbed from 3.71% in Q1 2021 to 3.84% in Q4 2021.

Slowing refinancing levels, however, have been a boon for buyouts, as lenders and syndication desks had more bandwidth to work through the pipeline of financing opportunities. Recently closed buyout financing deals include Italian industrial waste recycling business Itelyum locking in a €450 million senior secured high yield bond package following its acquisition by PE firms Stirling Square and Deutsche Beteiligungs AG, and Swedish building maintenance company Polygon landing a €485 million institutional loan financing following its secondary buyout by AEA Investors from European buyout house Triton.

As PE deal activity has rebounded and managers backed more mega-deals, leveraged loan and high yield bond issuance for buyouts has also bounced back

View full image: European buyout leveraged loan issuance (quarterly) (PDF)

Positive pipeline

There is little sign of the market slowing down in the months ahead. Buyout financing momentum continued apace in the final quarter of 2021, with the portion of the loan market earmarked for buyout financing climbing to an all-time high by October 2021, according to Debtwire Par. And some €6.5 billion of the €8.5 billion of institutional loans in syndication in Europe at the time stemmed from LBO transactions.

With some PE deals struck in 2021 still looking for financing as well as the completion of a bundle of auction processes that will also tap debt markets, involving the likes of Serrala and CeramTec, leveraged finance investors will be kept busy for some time yet.

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