Debt Capital Market Update - Q3 2019

TKO Miller Debt Capital Market Analysis 

• Leverage multiples remain at peak levels in M&A transactions due to an aggressive lending environment and the low cost of debt
• Leverage multiples, as measured by Total Debt / EBITDA, increased from 3.9x in 2018 to 4.1x in 2019 (as depicted in the graph below)
• Leverage conditions are expected to remain highly supportive over the next 9-12 months, but trade tariffs with China and Europe, a global economic slowdown, or uncertain political conditions are capable of shifting conditions back to lower, more historic levels
• The aggressive growth initiatives for both strategic and financial buyers, and a greater ability to fund acquisitions will remain strong
• The debt market is a key driver of M&A valuations; valuations will decrease when leverage multiples fall, and the cost of debt increases
• Transactions are seeing decreased equity contributions in response to rising leverage multiples compared to 2018 levels (as depicted in the graph below)

Total Debt/EBITDA Multiples 

By Steve Yahnke on Oct 17, 2019 7:15:00 AM