| UK buyout market drops by 80 per cent in Q4 |
|
|
| Written by Adrie van der Luijt | |
| Tuesday, 08 January 2008 | |
|
The value of UK buyouts in the fourth quarter of 2007 was £2.9 billion compared to £15.4 billion in the third quarter.
Figures released by CMBOR, the provider of analysis on the UK buyout market founded by Barclays Private Equity and Deloitte, reveal that 2007 still produced record total deal value of £42.2 billion compared to £26.5 billion in 2006. Mark Pacitti, corporate finance partner at Deloitte, said that the credit crunch had clearly had a dramatic impact on bigger private equity deals in the fourth quarter, which had impacted on the year’s overall deal value and volume. Mid-market deals (£10m-£1bn) were also down this quarter, but overall in 2007 the value at £20 billion was consistent with the previous three years. Pacitti added that analysis of deals by sector over the year reflected the downward trend in UK consumer confidence. Leisure sector deals in 2007 dropped 80 per cent to just £1.26 billion after £5.56 billion in 2006. Business and support services showed the greatest increase trebling from £2.46 billion last year to £7 billion this year, demonstrating a private equity preference for business exposure rather than consumer exposure. Quietest quarter since 2003 The fourth quarter figures suggest quieter times ahead for buyouts, despite the major deals funded in 2007. Tom Lamb, co-head of Barclays Private Equity, explained that this had been the quietest single quarter for UK buyouts since 2003, and put the UK buyout market back to 1997/98 levels on a run-rate basis. “With around £35 billion raised by UK private equity funds in the last two years, this trend suggests it could take several years to invest the current generation of funds compared to the 2 or 3 years which has become the norm,” Lamb added. He said that the credit crunch had hit all new deal activity, hurting secondary buyouts as an exit route. There was not a single secondary buyout over £250m in the last quarter, having accounted for 12 of the top 30 exits in 2007. IPOs of buyouts are also down. Eleven of 2007’s buyout flotations took place before the credit crunch. Lamb said that buyout funds could have a problem on both buy-side and sell-side until the credit markets recover. Exit value was down by 24 per cent from 2006 in the final quarter of 2007. There was a record total exit value in 2006 at £26.9 billion compared to £20.5 billion in 2007. The total number of exits in 2007, however, was the highest ever recorded at 355. Fundraising was down by 33 per cent from 2006 at £15.2 billion, after a record total of £20.2 billion set in 2006. Deal flow Public to private buyout slowed in the fourth quarter at £1.4 billion, in sharp contrast to the first nine months of 2007 at a record £18.1 billion. Pricing and debt levels rose in 2007. EBIT multiples have again risen for buyouts over £100 million and stood at 19.7 in 2007 and 16 in 2006. Debt to EBIT multiples were also high for larger buyouts, with this ratio reaching 11.4 in 2007 compared to 9.1 in 2006. Only 3 of the top 30 deals over £250 million were completed in the final quarter, with the largest being the public to private buyout of Monsoon at £755 million in December. Deal flow slowed in fourth quarter with 75 buyouts to date after 153 in the third quarter. The current total for 2007 is 572 to date, with year end projected to reach 636. In 2006 the total was 683. Receiverships were up from 70 in 2006 to 95 in 2007, the first rise since 2002. New entrants and alternative forms of funding providers, such as hedge and infrastructure funds were adding to the market competitiveness that are not affected by the credit crunch.
Related links |
Subscribe to our weekly newsletter for top jobs, news and more
Digg it!
Post to del.ico.us
Seed in Newsvine
Post to Reddit
Post to Furl
Post to technorati
