Leveraged Buyouts Gone Bust

Copyright 2008, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Mergers & Acquisitions, June 2008

Since the onset of credit tightening last summer, the pace of North American leveraged buyout activity has dramatically slowed and a number of large LBOs have been put on hold or terminated. According to global buyout figures released by Dealogic, while strategic acquisition activity has fallen 24% from last year, sponsor-led buyouts have dropped 74%, with announced transactions under US$1-billion down 39% and deals over US$1-billion down 72%. While the disruption of the credit markets appears to have been an underlying cause of many of the failed LBOs, other issues such as regulatory changes, adverse economic conditions and litigation have also been factors. The issues facing the LBO market have contributed to a substantial decline in the number of deals but have also provided a