The value of buy-outs in the Northwest during the second quarter fell to its lowest level since 2005, according to private equity observer the Centre for Management Buyout Research.
The value of buy-outs in the Northwest during the second quarter fell to its lowest level since 2005, according to the Centre for Management Buyout Research.
Between April and July only £210 million worth of buy-outs and buy-ins were completed in the region, less than half the £535 million achieved in the first three months of the year.
Despite the fall, a record number of deals in the sub-£10 million range were recorded due to vendors rushing to sell their businesses before April’s tax changes.
By the end of the second quarter, 24 deals below the £10 million bracket had been completed worth £41 million, its highest level since the third quarter of 2006.
Barclays Private Equity Northwest director John Walker says it is possible that the tax changes have disguised a slump at the lower end of the market.
Deals in the £10 million-£50 million range also leapt in the second quarter, with six deals totalling £169 million compared with £76 million spent on three deals in quarter one.
The second quarter of the year also witnessed the collapse of deals in the healthcare sector. In the opening three months of the year, deals in the sector stood at £354 million, but dropped to just £3 million in quarter two. In contrast, the retail sector produced three deals worth £49 million compared with an absence of deals in quarter one. The second quarter was also strong for business services and manufacturing.
‘Going forward into the second half of the year, we should expect to see continued sluggish behaviour in the market as private equity houses struggle to deploy resources, with fewer UK businesses putting themselves up for sale,’ Walker adds.
Paul Lupton, Deloitte head of corporate in the north, observes that with a couple of exceptions, the Northwest deals market has slowed considerably. ‘While buyers have adjusted their prices downwards since the credit crunch first hit, vendors have still not caught up, causing delays in the deal process.
‘Funders are also conducting more due diligence to ensure the viability of each opportunity, which takes more time and increases the risk of new issues arising or deal fatigue setting in. As a result, I would be surprised to see the market pick up significantly in quarters three and four.’
