The PE world didn’t blow up Monday after the Dow Jones Industrial Average shed 600 points and the S&P 500 plunged nearly seven percent. In fact, several sources say it is too soon to say what effect the broad market sell-off and the S&P downgrade of U.S. debt would have on deals.
Many PE execs don’t think it will have any affect at all. “One day of delay does not mean anything in the PE business,” a buyout exec said. “If there are real structural problems on financing they will not even exist unless delays become ‘permanent’ which takes a few weeks to establish.”
“We are not day traders,” the exec added.
A second PE exec said that the current environment is highly uncertain and that will impede deals. However, the markets have been unsettled for a couple of weeks and this was not really a function of yesterday’s selloff, the source said.
Justin Abelow, a Houlihan Lokey MD responsible for U.S. and European sponsor coverage, said that short-term events, despite their severity, often don’t matter in the PE world. “It begins to matter when and if it feeds into people’s view about certainty,” he said. “When and if that happens—and none of us knows if it’s happened yet—it could have some dampening effect on transactions, particularly on things like the IPO market which depends on some level of shared conviction. It’s not yet a major event in the PE market.”
However, another banker said his firm has had “to put some things on hold with the hope that the market settles post Labor Day…not pretty out there at all.”
What deals have been delayed? One source pointed to the refinancing of Insight Global by Harvest Partners. Today, BNP Global was supposed to go out with “issuer friendly revisions” for Insight Global’s $177 million loan. This week’s heavy market volatility caused BNP to nix those plans, according to S& P Leveraged Commentary & Data. Instead, the $177 million loan will wrap at initial terms, the story said.
Harvest Partners acquired Insight Global, an Atlanta provider of IT staffing services, last summer.
Insight plans to use proceeds to refinance senior debt and $36 million in subordinated debt owed to Hancock Capital, LCD said.