| NEW YORK
NEW YORK Oct 13 US bankers desperate to book
revenue before year end are trying to boost leveraged M&A
activity by pushing deals through after the looming presidential
elections, which could create a busy finale for a volatile year.
Deals that have yet to be announced could be rushed to the
market before the end of the year to help pad out low M&A
issuance in an unusually busy end to 2016, which has been
dominated by political and macroeconomic events.
US leveraged M&A volume of US$62.74bn was 47% lower in the
third quarter compared to US$118.68bn a year earlier, according
to LPC data, as uncertainty over the elections, corporate
earnings and the prospect of Brexit took a toll on private
equity and corporate leveraged acquisitions.
Bankers are facing an uphill battle to meet budget targets
after a slow start to the year in the US leveraged loan market
after investors were spooked by low oil and commodity prices and
slow growth in the US and China in late 2015 and temporarily
stopped lending to most non-investment grade credits.
Recently-announced leveraged M&A deals, including sporting
goods retailer Bass Pro Shops' US$5.5bn acquisition of hunting
and fishing store Cabela's Inc, could be launched to the market
before the end of the year, sources said. Banks have provided
US$5.1bn of debt commitments to finance the acquisition, which
was announced on October 3.
"Some years there's sort of a relaxing at the end of the
year," said Richard Farley, a debt financing partner at Kramer
Levin Naftalis & Frankel LLP. "But given how soft things were in
the first quarter, in particular, I think there's a lot of
appetite for getting as many deals in as possible before the end
Investment bankers are facing a fourth quarter holiday
period that has been further complicated by an increasingly
bitter US presidential election, scheduled for November 8.
Although cash-rich investors are already discounting the
election result, borrowers are reluctant to be in the market for
fear of any ensuing volatility that could disrupt the market or
"If you poll investors none of them think that the outcome
of the election is going to have a material impact on the credit
markets whatsoever," said one banker. "But none of the issuers
want to be in the market seven days before the election or three
days after. Why be in the market when a timeframe may or may not
have some volatility?"
This leaves two clear windows to get deals done, the first
immediately after the election and the second post Thanksgiving.
Both times are expected to be busy, particularly if Hillary
Clinton wins the election, which is expected to improve
sentiment and activity.
"I think you have now for the first time in a while a little
bit more optimism, and I think a lot of that has to do with
people thinking that Hillary (Clinton) is going to win the
election and that Brexit hasn't had a big impact and the Fed
hasn't yet started to really raise rates," Farley said. "It
seems a bit more stable. But it's still not wildly robust by any
Most of the US M&A deals in the pipeline are smaller with
enterprise valuations of less than US$2bn, which means that it
should still be possible to announce and price deals of up to
US$1bn before the end of the year.
The active middle market space, in particular, is likely to
see deals announced and financed before January, according to
Steven Rutkovsky, a debt financing partner at Ropes & Gray LLP.
But not all of these deals will be syndicated as non-bank
lenders have raised large amounts of capital that they are keen
to put to work.
"The time period between signing and closing has become
quite compressed, particularly for smaller middle-market deals,"
Rutkovsky said. "In those deals, financing is often preplaced or
arranged with a small group of lenders and therefore is not
dependent on the syndicated loan or high-yield markets."
(Reporting by Jonathan Schwarzberg; Editing By Tessa Walsh and