2002 European MBO figures set new record

A series of high level buyouts in Continental Europe increased the value of buyout activity in Europe to E38bn in 2002, a 20 per cent increase on the previous year.

(PrivateEquityCentral.net) New figures from the Centre for Management Buyout Research (CMBOR) show the value of continental European management buyout deals reached E38.7bn last year, 20 per cent higher than the level reached in 2001, and substantially ahead of the E25bn recorded in the UK.


The UK buyout market, which has declined for the past three years, fell behind continental Europe for the first time in 2001. The aggregate European value has now overtaken the highest value ever recorded in the UK of E38.2bn in 2000.


Large deals are fuelling the continental market, with 60 per cent of the total value coming from just four per cent of the deals worth at least E500m each. The UK posted a larger number of transactions – 525 against 447 – but the average size of those deals was E45.5m, compared with E86.5m on the continent.


“Restructuring programs on the continent are bringing big businesses to the market which US and UK based private equity houses, with record funds available, can swoop on as opportunities have slowed up domestically,” Chris Ward, head of corporate finance advisory at Deloitte & Touche, said in a statement.


“The record value reflects the gradual maturing of the European private equity market although there is plenty of room for further growth, with few dominant local players and vendors still sceptical of venture capital,” Ward added.


Large deals, including the E4.9bn buyout of Legrand by French private equity firm Wendel Investissement and New York-based Kohlberg Kravis Roberts in July (the largest ever recorded by CMBOR for continental Europe and the second largest deal overall since records began), and the E3.2bn public-to-private acquisition of Jefferson Smurfit by Chicago-based Madison Dearborn in August, are largely responsible for continental Europe's record deal value. In total, half of the deal volume in 2002 was generated by the top 10 deals.


Within continental Europe, country performance varied substantially. The German market declined for the third year in a row from E15.1bn to E5.8bn, although the volume of deals remained fairly steady.


Conversely, in France total buyout value rose over 100 per cent to reach a new record of E13.8bn despite a significant drop in deal numbers. While Germany wasstill the most active country for buyouts, with 86 deals, followed by France with 77, France has now overtaken Germany to become largest buyout market in continental Europe.


Germany has the most developed private equity market within continental Europe and has performed similarly to the UK, with a decline at the volatile top end of the market,” Ward said. “By contrast, France has seen four deals in excess of E1bn in 2002, and has reasserted its position as the biggest MBO market in Europe after the UK.”


The Italian and Swiss markets increased significantly from 2001, and new record values were reached in Italy and Ireland (largely because of the Jefferson Smurfit deal).