‘The Large LBO Is Back’: Goldman Sees Return of Mega Deals

(Bloomberg) -- It’s shaping up to be a big year for debt-financed acquisitions and leveraged buyouts, according to Christina Minnis, global head of acquisition finance at Goldman Sachs Group Inc.

The bank has underwritten five bridge loans in 2021 with a size of more than $10 billion, near the record of eight for a year. “We’re actually on a pace to beat that record,” Minnis said in a Bloomberg Television interview Friday. “I actually think we are in the first few innings of very large transactions.”

Goldman recently wrote an $18 billion check to help AT&T Inc. finance its mega media deal with Discovery Inc. Dealmaking worldwide climbed to a record $1.1 trillion in the first quarter as the economy rebounded, and is already nearing the $2 trillion mark thanks to AT&T’s spinoff.

The frenzy is not just reserved for blue-chip companies, with the outlook for leveraged buyout activity also robust. Private equity sponsors are expected to partner up for large club deals as the size of transactions increases, with some looking at buyouts that require $10 billion of equity, Minnis said. “The world of the large LBO is back.”

Read more: Goldman’s Ambition to Match JPMorgan on AT&T Deal Meets Reality

Top buyout firms are currently bidding for Medline Industries Inc., a medical supply company that could fetch about $30 billion and mark the return of major club deals.

On the financing side, direct lenders will play an important part as dealmaking surges, Minnis said. Owl Rock Capital Partners, for example, is leading a $2.3 billion loan to help fund the buyout of Calypso Technologies Inc. by Thoma Bravo, one of the biggest deals ever seen in the private debt market.

“I don’t see the direct lenders pulling back at all, in fact I see them being a very important force,” and Goldman Sachs will partner with many of them going forward, Minnis said.

The Covid-19 outbreak caused many companies to shift into survival mode, but now they’re focused on how to grow in a post-pandemic world, Minnis said. And she’s bullish on Europe as well, noting exceptionally busy activity both in the region and through cross-border deals.

“The European leveraged finance markets are very strong, as strong as we’ve seen in years,” she said.

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