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Year-End Spotlight: GPs bring their own debt

Accessing debt finance became such a protracted process that GPs started underwriting it themselves, even for small deals.

The scarcity of available leverage forced many GPs to rethink they way they structure deals – at both the large and small end of the deal size spectrum. Large firms such as Permira and Apax Partners, underwrote significant deals entirely with equity.

Permira’s £225 million (€250 million; $359 million) take-private of financial services company Just Retirement – announced in September – was the firm’s first to be funded entirely with equity capital from the €9.6 billion Permira IV fund.

Year-End Spotlight

Apax, meanwhile, underwrote the entirety of its portion of the £975 million buyout of clinical trial business Marken – announced in December – with equity from its €11.2 billion Apax Europe VII fund. With the deal agreed, Apax will now talk to banks to put a debt package in place before the deal is scheduled to complete in early 2010.

Several private equity firms operating in the mid-market also took this approach to get acquisitions agreed. Advent International, Gresham Private Equity, Dunedin and Change Capital Partners were among those to ink unleveraged deals.

“It has been done a few times this year as a tactical means to close down processes,” commented Jacques Callaghan, managing director at investment bank Hawkpoint, following Apax’s Marken deal. Callaghan added that the trend was being driven by high levels of competition among financial sponsors chasing a limited number of deals.

For detailed information on all-equity deal structures, consult the archived PEO coverage listed on the right.