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Home / Companies / News /  Buyout boom gains steam in record year for private equity

Big leveraged buyouts are back, and this year’s crop might just be a taste of things to come.

Private-equity firms have announced a record $944.4 billion worth of buyouts in the U.S. so far this year, 2.5 times the volume in the same period last year and more than double that of the previous peak in 2007, according to Dealogic. So far this year, there have been five $10 billion-plus deals in the U.S., equaling the total in all of 2007, though still below the high-water mark of nine in 2006.

Driving the urge to go big are the billions of dollars flowing into private-equity coffers as institutions such as pension funds seek higher returns in an era of low interest rates. Buyout firms have raised $314.8 billion in capital to invest in North America so far in 2021, pushing available cash earmarked for the region to a record $755.6 billion, according to data from Preqin.

The fundraising shows no signs of abating, indicating the private-equity shopping spree will continue. Thoma Bravo LP, KKR & Co., Carlyle Group Inc. and Permira Advisers are among those raising big new funds, each with targets ranging from $15 billion and $22 billion, Preqin data show.

As the end of the year approaches, big buyouts are coming fast and furious. A week ago , private-equity firms Bain Capital and Hellman & Friedman LLC agreed to buy healthcare-technology company Athenahealth Inc. for $17 billion including debt. A week earlier, KKR and Global Infrastructure Partners LLC said they would buy data-center operator CyrusOne Inc. for nearly $12 billion. And the week before that, Advent International Corp. and Permira signed an $11.8 billion deal for cybersecurity-software firm McAfee Corp.

The recent string of big LBOs followed the $30 billion-plus deal for medical-supply company Medline Industries Inc. that H&F, Blackstone Inc. and Carlyle struck in June in the largest buyout since the 2007-08 financial crisis.

Many of the pre-financial crisis deals—some of which, like TXU Corp., were bigger than the current crop—struggled, leading to a decade of cautious behavior by buyout firms.

Private-equity executives say the current generation of big deals won’t suffer the same fate as TXU (renamed Energy Future Holdings Corp.), which filed for chapter 11 bankruptcy protection in 2014, and others of that era.

“There is a huge difference in the level of stability of these businesses, the level of interest rates and the depth of the industry’s resources," said John Connaughton, co-managing partner at Bain.

The big deals Bain and its rivals are doing are in healthcare and technology, two fast-growing areas of the economy with room for consolidation, where scale doesn’t have to mean sacrificing returns, he said.

Private equity isn’t the only corner of the deals market that is surging, as lofty stock prices and low interest rates encourage transacting. The IPO market is also running at a record pace, and merger volume in the U.S. is twice last year’s level, according to Dealogic.

This story has been published from a wire agency feed without modifications to the text

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