Jacco Brouwer, Managing Director and Head of European Debt Advisory, was recently featured in Private Equity International, discussing how the appropriate use of leverage can support operational improvement and value enhancement.
Jacco commented: “Leverage remains a hot topic as it is a key driver of both returns and leveraged buyout valuations. Leverage has become more difficult to calculate based on reported EBITDA and acquisition debt levels, as loan documentation increasingly permits EBITDA add-backs for acquisition synergies and reorganizations. Baskets in debt documentation permitting other types of debt, whether on- or off-balance sheet, have also complicated calculations. This is particularly the case for larger mid-market deals, syndicated loans and bonds.”
“While leverage remains a critical component in determining financial returns, sponsors are, therefore, becoming increasingly focused on operational improvements, buy-and-build strategies or even transformational change to drive returns,” he added.
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