Lending to private equity drops off a cliff

Loan financing to private equity firms dropped by 90 percent in 2009, according to data published today. The figure indicates the extent to which private equity firms had to adapt to a credit-starved environment over the last 12 months.
 
In 2009 the volume of financial sponsor loan financing globally was $14.3 billion, according to data provider Dealogic. The figure for 2008 was $144.3 billion. The second quarter of 2009 saw the lowest volumes on record.
 

Where's the capital?

Buyout activity, while experiencing a significant decline of around 60 percent, did not grind to a halt, suggesting that financial sponsors continued to make acquisitions where possible, using reduced or no leverage. In a recent example of this, when Apax agreed to buy clinical trial company Marken for £975 million (€1.1 billion; $1.6 billion) in December, it did so without bank financing.
 
Also notable is the turnaround in financial sponsor-backed IPO activity. Having been in the doldrums for the first half of 2009, the market for IPOs bubbled back to life in the last six months meaning more money was raised from public market listings last year than in 2008. Of the $15.9 billion raised from IPOs in 2009, 97 percent came in the second half of the year.
 
Goldman Sachs was the top investment bank in terms of earning fees from financial sponsors, bringing in revenues of $421 million – up 10 percent on 2008. The bank earned $57 million in fees from Goldman Sachs Capital Partners alone.
 
Overall investment banking revenue from financial sponsors was down over the year, totalling $3.8 billion in 2009, compared to $6.1 billion in 2008.