It’s all quiet on cash-rich buyout front

Private-equity firms, with a record amount of cash, are struggling to find ways to spend it.

A year ago, fears of an economic slowdown and worries about trade tensions with China sent a tremor through markets and put some leveraged buyouts on hold. But while stocks rebounded in the new year, US buyout activity never fully recovered.

The aggregate value of US buyouts fell 25 percent year to date through October, compared with the same period a year earlier, according to data provider Preqin. Deals totaled $155.2 billion during the first 10 months of the year — the lowest since 2014.

The restraint buyout firms are showing suggests a level of discipline that wasn’t present during the last market peak in 2007, when they struck $365.9 billion worth of deals in the US. Many of the companies they bought then struggled during the ensuing global financial crisis, and a number have filed for bankruptcy protection.

The drop in activity comes as firms’ unspent cash dedicated to North American buyouts reaches a record $771.5 billion, up nearly 24 percent since the end of last year and more than double where it stood at the end of 2014, Preqin data show.

A potential buyout of Walgreens

Boots Alliance that KKR had considered shows some of the challenges facing firms. Financing such a deal would always have been tough given Walgreens’ market value of more than $50 billion, but the math has become even more difficult as loan buyers have begun pushing back on what terms they are willing to accept. The parties haven’t been close on valuation, and no deal appears imminent, people familiar with the matter said.