Private equity buyout deals to slow down in face of Brexit uncertainty

But Q4 2018 private-equity deals hit 10-year high in run-up to Christmas

Private equity buyout deals will falter in the first half of this year, according to DC Advisory UK CEO Richard Madden, due to macro-Brexit uncertainty and political instability.

Fourth quarter of 2018 was very busy, according to DC Advisory, with investors pushing to close transactions before the Christmas break.

The number of buyout deals completed in Q4 2108 was nearly 60 per cent higher than the same quarter last year – the highest activity level for 10 years.

The trend throughout 2018 was for primary buyout deals, which nearly doubled (82 per cent) year on year. In total, 140 deals were closed in 2018 compared with 77 in 2017.

Meanwhile, there were twice the number of secondary buyouts – when a private equity firm sells its stake to another PE firm – than there were trade sales, which shows how much nimbler PE can be when it comes to buying companies.

Business services, industrial products and telecoms/media were the busiest buyout sectors. However, investment in the leisure, retail and consumer sector was relatively quiet, which is unsurprising given high-street woes and nervous consumer confidence.

Among the high-street names to be sold in Q4 2018 was noodle restaurant chain Wagamama, which Duke Street sold to The Restaurant Group for £357 million; and out-of-home advertising company Exterion Media, which Platinum Equity sold to Global Radio UK bought for £400 million.

When it comes to Brexit, Madden reiterated that the best-case scenario from private equity’s point of view would be for a new vote to remain in the EU; the next-best alternative would be a swift and definitive agreement eliminating the volatility.