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Private equity gets deeper into debt

January 24, 2013: 11:48 AM ET

Leverage multiples on the rise.

FORTUNE -- Leveraged buyout debt multiples are on the rise, according to S&P Leveraged Commentary & Data.

LCD breaks its numbers out by company size, with "large" being anything with more than $50 million in EBITDA. And, for those deals, leverage multiples rose to 5.3x in 2012. This includes a 5.5x mark for Q4 2012, and represents the fourth straight annual increase since a 4x nadir in 2009. The all-time high mark was 6.2x in 2007, while the 5.3x figure matches what LCD saw in 2005.

Source: S&P Leveraged Data & Commentary

Source: S&P Leveraged Commentary & Data

For "small" companies of $50 million of less in EBITDA, the LBO debt multiple hit 4.5x in 2012. This included a 5x figure in Q4, and compared to 4.3x in 2011:

Source: S&P Leveraged Commentary & Data

Source: S&P Leveraged Commentary & Data

Overall purchase price multiples for all LBOs fell to 7.9x in 2012, which is the second-lowest mark in the past six years (2009 being the outlier).

Large LBO purchase price multiples fell from 9.1x in 2011 to 8.9x in 2011, although they hit 9.2x in Q4 2012. Similar story in the smaller market, with an 8.9 figure for all of 2012 -- compared to 9.1x in 2011 and 9.2x in Q4 2012.

Equity contributions stayed fairly flat on large deals at around 36%, while smaller deal equity contributions climbed past 40%. The below chart represents equity contributions for all private equity deals:

Capture

SourcE: S&P Leveraged Commentary & Data

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Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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