Are Private Lenders Ready for a Recession?

Partner William Snyder, Director Eileen Frino, and Manager Edwin Clark, with support Senior Associate Kenny Greenstein discuss downturns and private debt in the most recent installment of the Turnaround Management Association‘s Journal of Corporate Renewal.

For those who survived the global financial crisis (GFC) in 2007 and 2008, the aftershock seemed inevitable—and indeed it was. The capital invested in the middle market by private equity firms is exemplary. In 2007 there were 6,374 private equity M&A deals closed, representing $650.9 million of invested capital at an average debt-to-EBITDA multiple of 6.86x.1 It wasn’t until 2014—a full seven years later—that a similar amount of capital was invested in this market. But that was only the beginning of what turned out to be unprecedented growth in investment in this market.

Many recall hearing industry experts commenting from 2008 to 2010 on the immense amount of private equity capital that had been put to work pre-GFC funding middle market M&A. Many thought that there would never again be a time when so much money would be deployed at such “crazy multiples” with minimal structure or covenant-lite terms. However, by 2021 there were 9,446 M&A deals closed, representing a total of $1.1 trillion of invested capital.

Read full article here at TMA Journal of Corporate Renewal.

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