Editing Leveraged buyout (section)

===Age of the mega-buyout===
{{Main|Private equity in the 21st century}}
The combination of decreasing interest rates, loosening lending standards, and regulatory changes for publicly traded companies (specifically the [[Sarbanes–Oxley Act]]) would set the stage for the largest boom the private equity industry had seen. Marked by the buyout of [[Dex Media]] in 2002, large multibillion-dollar U.S. buyouts could once again obtain significant high yield debt financing from various banks and larger transactions could be completed. By 2004 and 2005, major buyouts were once again becoming common, including the acquisitions of [[Toys "R" Us]],<ref>{{cite news|last=Sorkin|first=Andrew Ross|last2=Rozhon|first2=Tracie|url=https://www.nytimes.com/2005/03/17/business/17toys.html|title=Three Firms Are Said to Buy Toys 'R' Us for $6 Billion|newspaper=[[New York Times]]|date=March 17, 2005}}</ref> [[The Hertz Corporation]],<ref>{{cite news|first=Aaron Sorkin|last=Sorkin|first2=Danny|last2=Hakim|url=https://www.nytimes.com/2005/09/08/business/08ford.html|title=Ford Said to Be Ready to Pursue a Hertz Sale|newspaper=[[New York Times]]|date=September 8, 2005}}</ref><ref>{{cite news|last=Peters|first=Jeremy W.|url=https://www.nytimes.com/2005/09/13/business/13hertz.html|title=Ford Completes Sale of Hertz to 3 Firms|newspaper=[[New York Times]]|date=September 13, 2005}}</ref> [[Metro-Goldwyn-Mayer]]<ref>{{cite news|last=Sorkin|first=Andrew Ross|url=https://www.nytimes.com/2004/09/14/business/media/14studio.html|title=Sony-Led Group Makes a Late Bid to Wrest MGM From Time Warner|newspaper=[[New York Times]]|date=September 14, 2004}}</ref> and [[SunGard]]<ref>{{cite news|url=https://www.nytimes.com/2005/03/29/business/29sungard.html|title=Capital Firms Agree to Buy SunGard Data in Cash Deal|newspaper=Bloomberg|date=March 29, 2005}}</ref> in 2005.

As 2005 ended and 2006 began, new "largest buyout" records were set and surpassed several times with nine of the top ten buyouts at the end of 2007 having been announced in an 18-month window from the beginning of 2006 through the middle of 2007. In 2006, private-equity firms bought 654 U.S. companies for $375 billion, representing 18 times the level of transactions closed in 2003.<ref>Samuelson, Robert J. "[https://www.washingtonpost.com/wp-dyn/content/article/2007/03/14/AR2007031402177.html The Private Equity Boom]". The Washington Post, March 15, 2007.</ref> Additionally, U.S.-based private-equity firms raised $215.4 billion in investor commitments to 322 funds, surpassing the previous record set in 2000 by 22% and 33% higher than the 2005 fundraising total.<ref>Dow Jones Private Equity Analyst as referenced in [http://www.boston.com/business/articles/2007/01/11/us_private_equity_funds_break_record/ U.S. private-equity funds break record]Associated Press, January 11, 2007. {{Webarchive|url=https://web.archive.org/web/20200314131015/http://archive.boston.com/business/articles/2007/01/11/us_private_equity_funds_break_record/ |date=March 14, 2020 }}</ref> The following year, despite the onset of turmoil in the credit markets in the summer, saw yet another record year of fundraising with $302 billion of investor commitments to 415 funds.<ref>{{cite news|url=https://www.reuters.com/article/idUSBNG14655120080108|title=Private equity fund raising up in 2007: report|newspaper=Reuters|date=January 8, 2008}}</ref> Among the mega-buyouts completed during the 2006 to 2007 boom were: [[EQ Office]], [[Hospital Corporation of America|HCA]],<ref>{{cite news|last=Sorkin|first=Andrew Ross|url=https://www.nytimes.com/2006/07/25/business/25buyout.html|title=HCA Buyout Highlights Era of Going Private|newspaper=[[New York Times]]|date=July 25, 2006}}</ref> [[Alliance Boots]]<ref>{{cite news|last=Werdigier|first=Julia|url=https://www.nytimes.com/2007/04/25/business/worldbusiness/25boots.html|title=Equity Firm Wins Bidding for a Retailer, Alliance Boots|newspaper=[[New York Times]]|date=April 25, 2007}}</ref> and [[Energy Future Holdings|TXU]].<ref>{{cite news|last=Lonkevich|first=Dan|last2=Klump|first2=Edward|url=https://www.bloomberg.com/apps/news?pid=20601087&sid=ardubKH_t2ic&refer=home|title=KKR, Texas Pacific Will Acquire TXU for $45 Billion|newspaper=Bloomberg|date=February 26, 2007}}</ref>

In July 2007, turmoil that had been affecting the [[Subprime mortgage crisis|mortgage markets]] spilled over into the [[leverage (finance)|leveraged finance]] and [[high-yield debt]] markets.<ref>{{cite news|last=Sorkin|first=Andrew Ross|last2=de la MERCED|first2=MICHAEL J.|url=https://www.nytimes.com/2007/06/26/business/26place.html|title=Private Equity Investors Hint at Cool Down|newspaper=[[New York Times]]|date=June 26, 2007}}</ref><ref>{{cite news|last=SORKIN|first=ANDREW ROSS|url=https://www.nytimes.com/2007/08/12/business/yourmoney/12deal.html|title=Sorting Through the Buyout Freezeout|newspaper=[[New York Times]]|date=August 12, 2007}}</ref> The markets had been highly robust during the first six months of 2007, with highly issuer friendly developments including [[PIK loan|PIK and PIK Toggle]] (interest is "''P''ayable ''I''n ''K''ind") and [[Cov-lite|covenant light]] debt widely available to finance large leveraged buyouts. July and August saw a notable slowdown in issuance levels in the high yield and leveraged loan markets with only few issuers accessing the market. Uncertain market conditions led to a significant widening of yield spreads, which coupled with the typical summer slowdown led many companies and investment banks to put their plans to issue debt on hold until the autumn. However, the expected rebound in the market after [[Labor Day]] 2007 did not materialize and the lack of market confidence prevented deals from pricing. By the end of September, the full extent of the credit situation became obvious as major lenders including [[Citigroup]] and [[UBS AG]] announced major writedowns due to credit losses. The leveraged finance markets came to a near standstill.<ref>{{cite news|url=http://www.Economist.com/finance/displaystory.cfm?storyid=9566005|title=Turmoil in the markets|newspaper=The [[Economist]]|date=July 27, 2007}}</ref> As 2007 ended and 2008 began, it was clear that lending standards had tightened and the era of "mega-buyouts" had come to an end. Nevertheless, private equity continues to be a large and active asset class and the private-equity firms, with hundreds of billions of dollars of committed capital from investors are looking to deploy capital in new and different transactions.