Where did all the LBOs go?

Source: Pitchbook

Lots of stories floating out there right now about the dearth of leveraged buyouts, compared to where things seemingly should be in a bullish equities market (and a loose credit environment). I think this is all a bit overblown, but there do seem to be four factors at work:

1. In the mid-markets, tax concerns pulled a lot of deals forward into Q4 2011. This is (part of) an argument made in a recent report from Brown Gibbons Lang, which expressed confidence that the mid-market deal spigot will reopen in late Q2. Not only because there is a glut of prospective deals getting prepped, but also (from my perspective) because a lot of mid-market firms have dollars that they need to put to work this calendar year. You can hold out in Q1 and Q2, but there is a legitimate deadline that many firms are working against.

2. The firms that have managed to raise money lately are very circumspect about sending it back out the door. They just went through the brutalities of fundraising, and don't want to experience that again anytime soon. New deals have to be extra-special.

3. The public equities boom means, in many cases, that strategic competition has become particularly fierce.

4. On the large-market side, the codification of stapled financing means that PE firms can no longer get "a better deal" by getting a better financing package. The only real differential is on the equity side – and PE firms are loathe to overpay with their own money (although are perfectly willing to do so with a bank's money).