Deals
M&A Drought Leaves Bankers at the Mercy of Private-Equity Firms
- Sponsors have the upper hand over lenders in leveraged buyouts
- Banks are taking on more risk to ensure they win deals
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A multi-year drought in M&A has left Wall Street banks at the mercy of private equity firms, who are now calling the shots in the few deals that come to market.
PE firms, also known as sponsors, rely on debt to fund their acquisitions and lenders make some of their biggest profits from underwriting the deals. Demand for those transactions — called leveraged buyouts — has been growing lately as risk appetite rises with falling interest rates, but there’s also been a dearth of good opportunities for banks to get involved in.