Jefferies

Actionable Ideas for Companies and Sponsors

Pre-Emptive Buyouts Now Dominating the Private Equity Landscape

For the first time since 2006, secondary buyouts in 2017 eclipsed sales to corporate buyers, and with this trend, financial sponsors have increased their focus on pre-emptively securing transactions. Pre-emptive strategies are taking many forms including: (i) offering risk reducing terms including public company contract terms and fully backstopped equity commitments to eliminate closing risk and reduce time to closing; and (ii) making pre-emptive offers during auction processes which include completed due diligence, committed financing and fully negotiated contract terms early in the auction process. In recent sale processes completed by Jefferies for Duravant (sold by Odyssey Investment Partners), First Watch Restaurants (sold by Freeman Spogli), PDC Brands (sold by Yellow Wood Partners) and Truck Hero (sold by TA Associates), financial sponsors have aggressively pushed to accelerate or truncate the process to improve their probability of winning.