Yahoo Buyout Would Test Limits of Loan Market, Kinetic Deal Could Be Model

An outright buyout of Yahoo by private equity firms, the latest fodder from the M&A rumor mill, would test the debt financing market’s appetite for a “mega-deal.” The institutional loan market, once the piggybank for buyout barons, may only be able to provide $3 billion to $5 billion toward nabbing the $20 billion internet company, according to sources polled by Thomson Reuters LPC.

Yahoo’s board has yet to put out the for sale sign, but behind closed doors, board members are reportedly interested in a deal. And private equity firms have been circling. Two, Blackstone Group and Bain Capital, are even mulling a $25 billion bid to take all of Yahoo private, Reuters reported last week.

A $25 billion buyout would be by multiples the largest LBO since the financial crisis. Though private equity transactions have perked up since 2010, the LBO world has yet to see a “mega-deal,” one whose purchase price exceeds $10 billion. The biggest so far have been this year’s $7.2 billion buyout of Samson by KKR & Co. followed by the $6.3 billion LBO of Kinetic Concepts by Apax Partners, the Canada Pension Plan Investment Board and the …

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