2007: A record year despite crunch

The buyout boom reached a European deal volume record for the year fuelled by unprecedented amounts of leverage before the credit market problems ended the party.

2007 was a record year for European private equity, according to data provider CMBOR, despite the dramatic events in the worldwide credit markets putting an end to mega deals in August.

The €171 billion ($269.6 billion) deal volume across the continent pipped the previous year’s record €170 billion driven by €66.9 billion of deals in the UK, up from €39.8 billion the previous year. These figures were swelled by Europe’s largest ever buyout, Kohlberg Kravis Roberts’ take-private of FTSE 100 company Alliance Boots for £11.1 billion ($22.2 billion; €14.1 billion).

Strip out the UK and deal volume in Europe fell almost 20 percent.

The amount of debt in buyouts also reached a record 53.2 per cent in 2007, despite the collapse in the debt markets in the second half of the year.

It is unlikely such heights will be scaled in the near future, as standard debt levels have readjusted to the new credit era. Ed Eyerman, head of European leveraged finance research at rating agency Fitch told PE yesterday he believed it would take the European debt markets at least two years to recover.

This raises the prospect that underperforming buyout firm-owned companies will have the value of their equity wiped out and will be unable to refinance, he said.

2007 data also portrays the changing face of the buyout universe. First half deal volume was a record €98.2 billion, but in the second half it fell to its lowest level since 2005 at €73.2 billion. The continental European buyout market volume, excluding the UK, also shrank by €25.7 billion to €104.6 billion.