High interest rates in Europe and other parts of the world and growing uncertainty over the cost of borrowing in the US could slow down parts of the global mergers and acquisitions (M&A) boom, warn experts. An accommodating debt markets helped spur M&A to record levels in the past year, with more than $4 trillion of deals in 2006 alone. Any increase in the cost of borrowing can make some deals, especially leveraged buyouts (LBOs) led by private equity firms, less affordable. Low interest rates around the world led to a buyout explosion by private equity firms such as Kohlberg Kravis Roberts and the Blackstone Group. So far in 2007, LBOs have accounted for more than a third of all deals in the US — higher borrowing costs would test the strength of that boom. “The private equity-led part of the corporate activity cycle will find it difficult,” said Andrew Milligan, head of global strategy at Standard Life Investments, which manages $270 billion assets.
