Travers Smith’s Paul Dolman argues a reviving buyout industry will increasingly drive European deal markets
2014 was a year that saw the number and value of private equity (PE)-backed exits reach unparalleled highs globally. More benevolent economic and market conditions, including an increase in global M&A activity, created renewed confidence in the industry. With a mountain of dry powder to deploy – that’s unused equity in the industry slang – and more debt funding available than has been the case for years (and on more favourable terms), PE firms have been very busy looking for new investment opportunities. This has resulted in fierce competition for any high-quality assets that come to market. Coupled with the continued high valuations of comparable companies on the public markets and near-zero interest rates, this has inflated valuations and resulted in the purchase-price multiples for leveraged buyouts in Europe reaching an average of ten times EBITDA – highs not seen since the peak of the last cycle.