Final quarter yields upturn in TMT and retail buy-outs

The lower mid-market is boosting the amount of deals closed in the UK's private equity market, new figures show.

The lower mid-market is boosting the amount of deals closed in the UK’s private equity market, new figures show.

Transactions in the £10 million to £100 million value bracket contributed 45 per cent of all UK buy-outs during 2012.

Statistics from Lyceum Capital and Cass Business School‘s UK Growth Buy-out Dashboard reveals that out of 190 buy-outs completed in 2012, 79 were found to have been located in the lower mid-market.

Lyceum Capital and Cass says that the sector has continued its ‘long-term recovery’ and has demonstrated resilience against Eurozone uncertainty and the restricted availability of bank financing.

Research from the study shows that despite deal volume falling by 12 per cent to 79 in 2012, the latest results compare ‘favourably’ to the 67 deals with enterprise values between £10 million and £100 million noted in 2010, and the 34 closed in 2009.

Lyceum Capital partner Andrew Aylwin says that the segment’s importance to the wider UK deals market ‘should not be underestimated.

He adds, ‘The success of the lower mid-market is not about financial engineering. Its foundations are firmly built on supporting and investing for growth in UK industries, be that business development, expansion capital or buy-and-build potential.

‘These collective attributes are unique to the lower mid-market and point to the £10 million to £100 million range’s ongoing recovery.’

More on Growth Buyout Dashboard studies:

The Growth Buyout Dashboard finds that deal activity was more prevalent in the first six months of the year, when 45 transactions were completed.

In its industry breakdown, the fourth quarter of the year revealed resurgence in retail and consumer sector deals when six businesses completed a buy-out. Technology, media and telecoms (TMT) was also found to be another ‘attractive industry’, with the sector adding five transactions in the last three months of 2012.

Scott Moeller, professor in the practice of finance at Cass Business School, comments, ‘The high number of retail and consumer deals completed last year reflects appetite from turnaround specialists to acquire distressed assets in the sector, which has been hit hard by falling consumer confidence.

‘High volumes of TMT and business services are likely to continue into 2013 as those industries respond to UK plc’s appetite to drive efficiencies. Although these are sectors where the fundamentals will likely continue to be strong into 2013, there is a strong base from 2012 for additional sectors to do well.’

Other key statistics:

  • Transactions in the £10 million to £50 million range dominated Q4 2012 (88 per cent of all buy-outs)
  • A total of 66 deals completed in the bracket during 2012 (compared to 13 in higher range)
  • Management buy-outs remain key source of deal flow (12 MBOs in final quarter)
  • Figures show eight lower mid-market exits in last quarter

Hunter Ruthven

Hunter Ruthven

Hunter was the Editor for from 2012 to 2014, before moving on to Caspian Media Ltd to be Editor of Real Business.

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