New York-based private equity firm Sycamore Partners agreed on Wednesday to buy listed retailer Staples for approximately $6.9 billion, in what is likely to be the largest leveraged buyout of the year.
With this transaction, the firm joins a gathering trend of private equity firms scouring the public markets for suitable acquisition targets.
“The large cap sponsors have [historically] avoided public-to-privates where they’ve been able to do private deals because they feel the chances of success are higher in a private deal,” Stephen Lloyd, a private equity-focused partner at law firm Allen & Overy, told Private Equity International.
“[However, there is] an awful lot of money chasing a very small number of large targets. The public markets represent approximately half of all companies… so just ignoring that entire market as a potential source for asset acquisitions is something they can’t really afford to do anymore.”
Lloyd told PEI Allen & Overy had already been providing training for a number of private equity professionals on the issues accompanying public-to-private deals.
“A lot of people have never done a public-to-private,” he said. “Everybody says they’d like to have that training because we’re going to be looking at that market more in the future.”
There had been $84.1 billion worth of completed or pending private equity-backed buyouts in Europe as of 28 June 2017, of which six deals totalling $7.3 billion were take privates, according to data from Dealogic. This is compared with 12 deals totalling just $5.5 billion out of a possible $187.9 billion throughout 2016.
In April, PAI Partners made an offer to acquire soft drink bottler Refresco, in a deal valued at $2.2 billion.