Mixed future for buyout market

Spring is looking good for the UK and European buyout markets but it could be downhill from then on, according to latest figures from the Centre for Management Buyout Research.

CMBOR – a provider of analysis on buyout markets founded by Barclays Private Equity and Deloitte at Nottingham University in 1986 – predicts that 154 deals (worth a combined £5 billion) will have been completed in the first quarter of 2005. However, the debt bubble and new tax rules cast a cloud over the rest of this year.

‘So far in 2005, the buy-out market has performed strongly,’ says Mark Pacitti, Corporate Finance Partner at Deloitte. ‘However, this bright start to the year may be destined to fade if the availability of debt packages starts to decline. If the banks get nervous, reduced debt packages could have a negative impact on both deal pricing and transaction volumes.’

On top of this, the Inland Revenue has recently announced that it intends to eliminate tax relief on private equity loan stock.

‘It appears that the Inland Revenue’s decision could reduce private equity returns by around ten per cent and will definitely have an impact on the price private equity houses are prepared to pay for businesses,’ explains Tom Lamb, Managing Director UK at Barclays Private Equity. ‘In terms of how this is likely to affect deals which are currently work in progress, there is likely to be hiatus with private equity teams downing tools. At the very least, there will be a major impact in the sector quarter.’

Leslie Copeland

Leslie Copeland

Leslie was made Editor for Growth Company Investor magazine in 2000, then headed up the launch of Business XL magazine, and then became Editorial Director in 2007 for the online and print publication portfolio...

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