LBO Activity Up 44% So Far in 2018

Leveraged buyout, or LBO, activity has been booming in 2018. According to an article from the Wall Street Journal last week, 2018 is on pace to have the highest dollar volume of LBOs since 2007, before the Great Recession. LBO activity for the year is up 44% from the same time-period last year. Overall M&A activity in 2018, at $2.1 trillion, is on pace to break the current record high for global M&A activity, set in 2007 at $4.3 trillion. Firms are pointing to large corporate deals - such as AT&T and Time Warner, the pending battle between Disney and Comcast for Twenty-First Century Fox, and Bayer’s takeover of Monsanto - as being a driving force behind the increase in activity. Activist investors or regulators may force the sale of assets to allow a corporate deal to take place, leaving more “orphaned” businesses for private equity firms to pursue. Also, debt is still relatively cheap, and the economy is strong, creating a greater incentive to acquire companies and select assets.

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