US buy-out activity in first half of year hits new record of $77bn

The first half figures were boosted by a handful of multi-billion dollar deals, such the $4.9bn acquisition of MGM by a consortium of Providence Equity Partners, TPG, DLJ Merchant Banking and Sony Corp. The second half already looks set to feature some important mega deals, such as the $8.8bn buy-out of Toys R Us and the $5.1bn buy-out of Neiman Marcus.

Danielle Fugazy, the editor of Thomson's Buyouts magazine, said activity had been supported by the strength of private equity fundraising over the last six months as well as the generous supply of debt finance.

'With the economy holding up and so much capital available, from lenders as well as equity sponsors, we expect the current pace to continue throughout the rest of 2005, and potentially into 2006,' she said.

There were, however, risks to returns, she said. 'The big concern right now is whether the upward pressure on pricing will have a negative impact on returns down the road. That risk is arguably greater as deal sizes increase.'

Smaller transactions also made an important contribution to aggregate activity. Of the 203 deals in the first half, there were 83 of less than $500m and 61 of less than $200m.

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