Deal data reveals European uptick

At the end of the slowest year for European buyouts since the mid-1990s, there were some stirrings of activity, according to CMBOR data.

European buyout activity showed a slight return in the fourth quarter of 2009, rounding off what was the slowest year since 1995, according to data from the Centre for Management Buyout Research (CMBOR) released this week.

The year as a whole saw just €19.1 billion-worth of buyouts in Europe, representing a drop of 74 percent on the €72.8 billion transacted in 2008. A number of deals agreed towards the end of the year, however, implied increasing confindence among buyers and vendors as the year came to a close. During the final quarter of 2009, €5.5 billion of private equity-backed buyouts were recorded, more than double the previous quarter's €2.9 billion.

Most of the year was pretty dire

Christiian Marriott

“Most of the year was pretty dire, with some green shoots appearing towards the back end of the year,” said Christiian Marriott, a director at mid-market firm Barclays Private Equity, the report's sponsors.

Notable deals to be inked in the last quarter included the £975 million (€1.1 billion; $1.5 billion) buyout of medical services business Marken by Apax Partners and Candover's and Cinven's sale of Springer Science+Business Media to EQT and GIC for €2.3 billion.

“Private equity buyers are now flexing their muscles,” said Marriott, who added that private equity firms were among the market's most active buyers, as opposed to strategics, because they have “very deliverable money”.

While CMBOR's data shows deal activity dropping off a cliff during 2009, prices paid for assets did not suffer a comparable fall.

“The surprising thing was the deal pricing,” said Rod Ball, a research fellow at Nottingham University Business School, where the report was produced. “They did not fall as much as we expected.”

For deals worth more than €100 million, the average price paid was 11x EBIT (earnings before interest and tax) during 2009. This represented a drop of 30 percent on 2008's average multiple of 16x. For smaller deals, the drop was less acute, falling from 11.8x in 2008 to 9.5x in 2009.