The UK buy-out market has hit a record high of £38.5 billion for the first nine months of 2007, already 45 per cent higher than the whole of 2006, according to data from the Centre for Management Buy-out Research (CMBOR). However, representatives of CMBOR’s joint founders Barclays Private Equity and Deloitte anticipate a significant slowdown.

The UK buy-out market has hit a record high of £38.5 billion for the first nine months of 2007, already 45 per cent higher than the whole of 2006, according to data from the Centre for Management Buy-out Research (CMBOR). However, representatives of Barclays Private Equity and accountancy firm Deloitte, the founders of CMBOR, anticipate a significant slowdown.

Tom Lamb, co-head of Barclays Private Equity comments that ‘the situation looks difficult for the larger buy-out market’ because banks are finding it difficult to sell on debt they have accumulated from recent large buy-outs, and may therefore be reluctant to lend more.

He adds: ‘I do not expect there to be many £1 billion deals announced until we are well into 2008.’

Mark Pacitti, corporate finance partner at Deloitte, agrees that the top end of the leveraged buy-out market has ‘overheated’.

‘Average debt multiples in the mid-market have remained constant at 5.2 while those in the larger deals have risen 18 per cent in the last year [9.1 to 10.7],’ he comments.

However, both Lamb and Pacitti downplay the possible effects of the credit crunch on the mid-market. Says Lamb: ‘Despite the recent credit squeeze, for a well-priced and well-structured mid-market deal, there is still an appetite among banks to fund the debt, often on a club basis. The UK mid-market should continue to be active into the fourth quarter.’

Figures for the third quarter of this year show exit value down 33 per cent on the same period last year at £18.2 billion, while buy-outs’ share of the total UK mergers and acquisitions market is down to two-thirds. Pacitti concludes: ‘The door is now opening for trade buyers.’