Capital Markets Report—Selectivity Among the Froth

We continue to see high transaction volume and have canvassed several of the most active middle-market debt and equity investors to discuss how they put money to work in Q3’18 and plan to do so for the rest of the year. Although dry powder among investors remains high, we have noticed a trend of increased selectivity and high touch due diligence among new investments as well as decreased fundraising activity through Q3’18. Despite this trend, we remain excited for an active Q4’18.

  • The total U.S. leveraged buyout loan volume has increased to $87 billion for 2018, with $18 billion of loans currently in the pipeline.
  • Middle-market credit spreads have continued to tighten, and investors have grown leery of lower credit quality opportunities without higher associated yields.
  • Middle market non-sponsored debt issuance increased to $27.3 billion in Q2’18, which was up 29% from Q1’18.
  • Private equity purchase price multiples remain elevated and are expected to remain high throughout 2018.
  • 2018 private equity fundraising activity is on pace for a six-year low reaching only $69 billion of new funds during the first half of 2018.

In September 2018, the Fed raised its target Fed funds rate to a range of 2% to 2.25% and projected the U.S. economy would see GDP growth for at least the next three years. Intrepid’s Capital Markets team brings an entrepreneurial approach to each advisory engagement and aims to partner with business owners and build long-term relationships with investors across the capital structure to help meet the goals of our clients at each stage of their business.

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