Blackstone Scores Biggest Buyout as Firms Spend Most Since 2007

(Bloomberg) -- Buyout firms spent the most on deals since before the credit crisis even as they wrestled with lofty prices that made bargain hunting tough.

Private equity firms announced $448 billion of deals in 2018 through Dec. 7, up about 8 percent from the same period last year, data compiled by Bloomberg show. Stephen Schwarzman’s Blackstone Group LP led the way with the $17 billion purchase of a unit of Thomson Reuters Corp.

“These deals have come in spite of what was until recently fully priced equity markets, which we feel have been dampening overall public-to-private deal activity,” said Max Justicz, head of financial sponsors in the Americas at UBS Group AG.

Deal volumes are well below the totals reached during the boom years a decade ago. Firms posted almost $650 billion in deals in 2007.

Billion-Dollar Deals

Mega-deals aren’t exactly back, though this year did see some big ones. KKR & Co. paid almost $10 billion for Envision Healthcare Corp.

“As many private equity funds have raised large amounts of money, they have migrated to evaluating larger deals and thus far, the financing markets have generally been there to support the resulting capital raises,” said Avery Whidden, head of financial sponsors for North America at JPMorgan Chase & Co.

Dry Powder

As market turbulence whacks the shares of companies, private equity shops are eyeing a big shopping spree to come.

Not even buyout titans like Schwarzman and TPG’s Jim Coulter know how long it will take companies to capitulate to current market realities and lower their asking prices, making them easier prey. But these asset managers do know that they are sitting on a very big pile of dry powder that does them little good until it’s spent.

Buyout specialists still have access to relatively cheap financing for deals. Interest rate increases have not impeded borrowing while investors in leveraged loans and high-yield bonds continue to find margins attractive on a risk-adjusted basis.

“I think the volatility will continue, so I’m going to be optimistic,” Coulter, co-founder of TPG, told Bloomberg TV last week. “Sellers want to sell in the old market and buyers want to buy in the market that might be coming. So I think you’ll see a near-term slowdown, but once we settle into the new era I’m very excited by private equity’s role.”

©2018 Bloomberg L.P.