Strong Resurgence in Leveraged Capital Markets
According to Michele Cousins, the Head of Leveraged Capital Markets for the Americas at UBS, clients are displaying increased engagement and demonstrating readiness to move forward with processes. Leverage-loan activity, frequently associated with private-equity deals, along with corporate refinancing, has experienced a significant rebound in recent weeks after experiencing a slowdown in October.
Evaluating Loan Activity Trends and Market Volatility
During the early part of the second half of 2023, there was a sense of optimism and a return to normalcy in loan activity, resembling a race towards progress. Unfortunately, this was short-lived as volatility made its way back into the markets in October, disrupting the forward momentum.
Favorable Indicators and Deal Environment
Max Justicz, who co-heads the Financial Sponsors division for the Americas at UBS, highlights the encouraging impact of favorable commentary surrounding the latest interest-rate decisions made by the Federal Reserve. Additionally, indicators like the Cboe Volatility Index are signaling a more stable market environment in recent times. Prospective buyers and sellers are leveraging value-bridging tools such as earnouts, seller notes, and equity rollovers to approach the finish line in terms of pricing, says Justicz. Private-equity funds are currently holding a record $2.59 trillion in “dry powder,” referring to capital patiently waiting on the sidelines, ready to be deployed into potential opportunities.
Anticipating a Normal Run Rate
Laurence Braham, the Global Co-head of Technology Banking at UBS, predicts that initial public offerings (IPOs) in the technology sector will approach a normal run rate of 30 as the market progresses through calendar year 2024. After a disappointing performance by three high-profile tech IPOs, namely Arm Holdings, Klaviyo, and Instacart, in the summer, the new-issues market experienced a cooling-off period during the fall.
Welcome Increase in IPO Processes
Despite the relatively dry period for technology IPOs in 2023, with lower activity than any other year since 2000, there is now a surge in the launch of new IPO processes. Braham believes that 2024 will outperform 2023, projecting potential upside surprises as the deal environment improves, influencing the overall market psychology.