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Cheap debt, bullish equity markets, bond markets that will buy most anything, and a private equity boom. It's not 2007, but it could be. The last time private equity deal making was this hot was 2007, when deals such as the battle for BCE Inc. were in the headlines.
To be sure, there's nothing that big going on at this point, but the activity is ramping up. The purchase last week by Hellman & Friedman of insurance brokerage Hub International for $4.4-billion (U.S.) puts the value of private equity acquisitions to $196.4-billion in 2013, according to figures from Thomson Reuters.
That's 23 per cent above last year at this time and marks the most robust stretch of private equity deal making since 2007.
Most of the activity is in the U.S., where the value of deals has soared 45 per cent. What's selling? Most everything. Consumer staples, high tech, and energy and power companies account for big chunks.
Private equity firms have also been busily tapping debt markets to refinance the companies they already own, pulling out dividends. IMS Health, owned in part by the Canada Pension Plan Investment Board, sold $750-million of high yield bonds with a payment in kind feature. That enables IMS to choose to pay interest in cash or new bonds. The bonds, known as PIK toggles, were a common sight during the pre-crisis boom years, but largely disappeared in the interim.
(Boyd Erman is a Globe and Mail Capital Markets Reporter & Streetwise Columnist.)
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