Fundraising is up, but mezzanine deal activity is trending down

Private Equity fundraising is at an all-time high, with dry powder and capital overhang surpassing its peak levels. In 2017, according to Preqin, a ten-year high of $282bn was reached in terms of capital raised for buyout fund managers. The second most active year for buyout fundraising was 2008 with $230bn (see Preqin post and chart detailing the past ten years). While there is tremendous growth in fundraising, SPS is noticing (and has been reporting) another trend: mezzanine deal activity has slowed significantly in the past year.

2017 Mezzanine activity down 37% from 2015

Over the 36-month period of January 2015 through December 2017, SPS has reported in its Mezzanine Market Perspective a decline in deal volume for Mezzanine transactions. Of the deals that traded in this time, volume has fallen by 37% from 597 deals in 2015 to 378 transactions in 2017.

Of the more than 1,500 combined mezzanine transactions that traded over this three-year period, 18% of deals traded in the Industrial: Equipment & products subindustry, followed by 10% in IT: Software & services and 5% in the Services: Misc., asset light.

The vast majority of mezzanine deals have traded in the sub $250MM EV range. Breaking out the subindustries by deal size, and more than 93% of the IT: Software & services deals that traded from 2015 – 2017 closed in the Sub $250MM EV range.

$10 – $49 MM EV range:

  • Industrial: Equipment & products (184)
  • IT: Software & services (106)
  • Services: Misc., asset light (52)

$50 – $249 MM EV range:

  • Industrial: Equipment & products (70)
  • IT: Software & services (35)
  • Media: Marketing & sales services (21)

Greater than $250 MM EV range:

  • Industrial: Equipment & products (10)
  • IT: Software & services (6)
  • Healthcare: Specialty clinics & centers (4)
  • Energy: Producers (3)

Mezzanine lending across North America

For the three-year period, the Great Lakes was the most active region for Mezzanine transactions. It’s not a surprise, given the robust number of Industrial deals requiring mezzanine financing.

Source: Sutton Place Strategies


Even as mezzanine activity has steadied downwards,many noteworthy deals have closed this year that were supported with subordinated debt:

  • In March, Maranon Capital supported the acquisition of the California based Specialty Sales by Benford Capital Partners with mezzanine and equity co-investment. Specialty Sales is a provider of automated hoof bath systems and the preventative hoof care treatment products utilized in these systems for commercial dairies in the United States.
  • Also in March of this year, Business Development Bank of Canada supported Legado Capital’s acquisition of Kivuto Solutions Inc with mezzanine financing. Kivuto Solutions offers academic software, e-texts and other digital resources for the academic industry.

For more information on the mezzanine market, read the latest Perspective, and sign-up to receive the Q2 Mezzanine Market Perspective that will be published this July.




Last week’s deals today

May 21 – May 25, 2018

~71 deals traded!

Deal of the week

Last week, Marlin Equity Partners acquired the Providence based Virgin Pulse Inc, a provider of employee health engagement services. Evercore Partners acted as the sell-side advisor.

Most active subsectors
  • IT: Software & services
  • Industrial: Equipment & products
  • Materials: Chemicals, minerals, & plastics
Most active cities
  • New York
  • San Francisco
  • Toronto






Photo by rawpixel on Unsplash.

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