Private Equity Squeezes Deal-Starved Banks for Better Terms (1)

A multi-year drought in M&A has left Wall Street banks at the mercy of private equity firms, who are now calling the shots in the few deals that come to market.

PE firms, also known as sponsors, rely on debt to fund their acquisitions and lenders make some of their biggest profits from underwriting the deals. Demand for those transactions — called leveraged buyouts — has been growing lately as risk appetite rises with falling interest rates, but there’s also been a dearth of good opportunities for banks to get involved in.

The mismatch means sponsors have the upper hand ...