PRIVATE equity firms are paying more for leveraged buyouts to keep pace with soaring valuations of acquisition targets, making some investors leery of whether the industry can keep delivering on promises of lucrative returns.
The booming stock market and cheap debt financing have helped push leveraged buyout prices to a record high, driven by sectors that have grown as people work and stay at home during the Covid-19 pandemic, such as technology and business services.
Private equity firms paid an average 13.2 times a company’s annual earnings before interest, tax, depreciation, and amortisation for US leveraged buyouts in 2020, an all-time high, up from 12.9 times in 2019, according to financial data provider Refinitiv.