CMBOR: Gearing down, multiples up

European buyouts had their lowest gearing levels for a decade during the first half of 2010, but were transacted at higher multiples than the market peak in 2007.

Buyouts in Europe have reached their lowest gearing levels for a decade, according to the Centre for Buy-out Management Research at Nottingham University. During the first half of 2010, deals were on average financed by two-thirds equity to one-third debt.

The value of European buyout activity during the first part of the year has already surpassed the [amount] transacted during the whole of 2009

CMBOR

“There has been a clear change in buyout funding for Europe” with some deals being entirely equity-funded, said John Harley, global private equity leader at Ernst & Young, in a statement. He added that this phenomenon represents an “inevitable consequence” of Eurozone debt concerns.

CMBOR’s European Buyout Market Overview also found that among larger transactions – those at €500 million or above – multiples rebounded to an average of 17.9x EBITDA, up from 10.5x last year and higher than the 17.6x market peak during 2007.

At €19.7 billion, the value of European buyout activity during the first half of the year has already surpassed the €18.1 billion transacted during the whole of 2009.

The UK remains the Europe’s largest private equity market, accounting for 41 percent of this year’s deals and €9.3 billion of investment.