The number of private equity backed deals soared by more than a third this year, prompting analysts to say there has been a return in confidence to the UK buy-outs market.
The number of private equity backed deals soared by more than a third this year, prompting analysts to say there has been a return in confidence to the UK buy-outs market.
According to the Centre for Management Buy-out Research, a total of 164 buy-outs were completed this year compared with 122 last year, an increase of 34 per cent. Overall, the total value of the buy-outs tops £18.2 billion, some £13.5 billion more than the £4.9 billion total for 2009, and 40 were valued at more than £100 million, the research finds.
Sachin Date, a markets leader at accountancy firm Ernst & Young, says the fact that nearly a quarter of deals were valued at above £100 million is ‘a good sign the bigger deals [are] returning’.
Date adds: ‘Confidence is returning to the UK buy-out market with buy-out values and volumes surpassing 2009 levels and average deal size tripling.’
Barclays Private Equity director Christian Marriott agrees, saying: ‘There has been a strong recovery in deals in the over £500 million size range but we have yet to see the mega-buy-out return in earnest due to continuing restrictions on the availability of debt and fewer investment opportunities at this end of the market.’
The average deal structure this year is equity at 68 per cent with debt making up the remaining 32 per cent – the highest percentage of equity ever and a dramatic change from 2005 when 35 per cent of buy-outs’ value was made up of equity and 65 per cent was debt.
Sachin says: ‘This change in deal structure is unsurprising given the fact that banks would only lend up to a point, resulting in increased equity contribution by PE firms. Additionally, with the debt markets still lagging behind the increasing deal activity, this trend is likely to continue in 2011.’
In monetary terms, manufacturing tops the sectors with a combined value of £5 billion, while business services has been the most active with 37 buy-outs compared to 22 last year. Financial services rounded out the top three sectors, with 11 deals totalling £2.8 billion.
