Lack of financing causes 40.4 drop in leveraged buyouts
Direct lenders take centre stage to help fund deals
KKR goes all equity to get April deal done source

LONDON, Dec 22 Reuters Private equity funds are rethinking how they pull off large deals after a 40.4 contraction in global buyout activity amid a shortage of debt financing caused by rising interest rates and banks39; reluctance to open their money taps.

Blackstone39;s acquisition of Emerson39;s Climate Technologies business in the United States and KKR39;s purchase of French insurance broker April are just two examples of how buyout houses are having to turn to private lenders or put more skin in the game to secure deals, bankers and investors told Reuters.

After a bumper start to 2022, the leveraged buyout LBO market has slowed down, as the war in Ukraine and hawkish interest rate moves drove up financing costs and weighed down valuations.

The number of LBO deals announced worldwide to Dec. 14 has dropped 23.3 from the same time last year, while the overall value of transactions has taken a 40.4 hit, based on Refinitiv data.

Overall, dealmaking globally has plunged 37 to 3.66 trillion so far this year, based on Dealogic data, after hitting an alltime high of 5.9 trillion last year.

The first quarter of 2023 is going to be relatively slow from a sort of MA and financing front, said Uday Malhotra, Citi39;s cohead of leveraged finance and loans for Europe, the Middle East and Africa EMEA.

But private…