Glad we asked it.
No doubt this is a fluid situation. In fact, given what has transpired in just the past week, our answer today could very well go back to the future in 30 days or so (more on that below).
But right now?
There is evidence – mostly anecdotal at this point – that the M&A world is beginning to awaken from the Big Sleep.
Last summer, we noticed a peculiarly interesting article about what had become a runaway lending environment. Debt capacity had risen as high as 6-7 times EBITDA. What’s more, EBITDA was fast becoming a proforma, go-forward, if-everything-goes-perfect figure. In other words, a substantially puffed up version of the truth that effectively added another 1-2 turns of EBITDA that lenders were willing to put up.
Remember the run-up to the global recession when lenders were tripping over themselves to get in on a mergers and acquisitions climate that was positively giddy?
When debt capacity, typically expressed as a multiple of a company’s earnings before interest, taxes, depreciation, and amortization reached milestone levels, eclipsing the “6X barrier” (as coined by PitchBook)?
When the term “covenant-lite”, describing loan agreements with fewer protective covenants for the buyer and less restrictions for borrowers, became a thing?
The saga of WeWork is the stuff of hubris – a financial folly built upon a hope and a dream, financed by a mountain of debt. Once a Google-esque darling of the hyper-hipster Technorati, the office sharing wunderkind saw its valuation tumble from $47 billion to $10 billion to whether it is even viable in the span of a few short months.
Consider the following from an article published by global insurance giant AON: “2017 and the first half of 2018 posted extraordinary growth in the use of representations and warranties insurance, tax insurance and bespoke contingent...