Deal stats hint at UK recovery

The UK buyout market may be poised for recovery, according to the latest industry figures from Nottingham University’s Centre for Management Buyout Research (CMBOR).

After falling in value for the last two years, statistics show that the UK’s management buyout market appears to have bottomed out.

The data, which is sponsored by Deloitte & Touche and Barclays Private Equity, reveals that MBOs worth £14.5bn have been completed so far this year, compared with £15.3bn in the whole of 2002. With three weeks of the year to go, the final total is expected to at least equal last year.

But the mooted recovery is a fragile one. Although the last three months has seen the total value of deals rise to £4.9bn from £2.3bn in the previous quarter, this is largely due to the impact of just two deals: the £2.5bn buyout of the Scottish & Newcastle pub estate and the £1.7bn delisting of Debenhams.

Said Tom Lamb, managing director UK of Barclays Private Equity: “Remove these transactions and we’re left with a market which is still extremely fragile. In fact, the overall market continues to be propped up by the mid-market, especially the £25m to £100m range which has actually grown by over 20 per cent this year.”

Confidence that a recovery is underway is fuelled by a number of large deal completions in the pipeline, including the $1.5bn purchase of Inmarsat by Apax Partners and Permira and the £642m buyout of Weetabix by Hicks, Muse, Tate & Furst. An upturn would be greatly welcomed by industry practitioners after an 18 per cent fall in deal volume in 2001 followed by a further 21 per cent drop in 2002.

The CMBOR report says the return of public-to-private transactions has been a feature of the market this year with delistings accounting for 26 per cent of deal value against 18 per cent in 2002.

Said Lamb: “P2Ps characterised the buyout market heyday so their comeback provides encouraging signs that deal conditions are improving. However, much of the low hanging fruit has now been taken off the stock market so it is unlikely that P2Ps will ever match the 39 per cent share of the buyout market achieved in 2000.”