Dealmaking may be down, but that hasn't stopped Blackstone Inc. BX from inking the largest private-equity buyout in months.
What Happened: The firm is close to completing a $14 billion transaction that would see it acquire 55% of Emerson Electric Co.'s EMR climate-technologies unit.
The deal comes at a time when market volatility has stymied M&A volume. According to Dealogic, global dealmaking decreased to $722 billion in the third quarter of this year. That's down 38% sequentially from the second quarter and down 54% from a year earlier.
"We will continue to transact in this market,” said Joseph Baratta, Blackstone's global head of private equity. “We like to invest in these moments. This is when you can do interesting things."
Blackstone placed the debt on its own, selling it to a variety of direct lenders and other buyers over the course of a month-long process.
“I think it will take at least six months for the credit market to normalize,” Baratta said, citing how the deal demonstrates Blackstone's edge over rivals by serving as a reliable counterparty for a variety of lenders.
Why It Matters: Blackstone's completing the deal indicates that private equity funds are willing to put together debt financing, and complete deals at a time when that type of financing is costly — or unavailable — with a traditional bank.
Banks would normally provide the debt funding in a conventional market, and sell it to other buyers. However, banks aren't providing such "syndicated financing," according to The Wall Street Journal, as they struggle with a mountain of debt from large buyouts made prior to stocks falling earlier this year.
Additionally, big banks have lost 43% of revenues as a result of the lack of IPOs in the first half of this year and the current market turbulence, Benzinga reported in August.
Additionally, the 6,916 transactions in the third quarter were 26% sequentially and 32% fewer year over year. As a result, the third quarter is now the worst since the beginning of the pandemic that froze dealmaking in the second quarter of 2020.
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