fever crowds out small MBOs

The volume of smaller buy-outs fell in the first quarter as venture capitalists focus on Internet start-ups, according to new figures.

The latest quarterly survey from the Centre for Management Buy-out Research (CMBOR) shows a total value for buy-outs and buy-ins between January and March of £3.9 billion, down from £4.5 billion in the last quarter of 1999, but up from £3.2 billion in the same quarter last year.

The number of deals under £5m in first quarter, however, fell to 68 (£136m), down from 76 for the same period last year.

Andrew Burrows, director of the centre, attributes the drop in the volume of smaller buy-outs to the enthusiasm of private equity houses for Internet and hi-tech startups.

“There is plenty of money around for smaller deals,” Burrows told PrivateEquityOnline, “but the minimum investment threshold for private equity funds seems to have increased.” He puts this down to the increasing cost of due diligence and the availability of bigger deals, including public-to-private transactions, which enable firms to achieve the same or better returns with less groundwork.

Mr Burrows believes managers at small firms considering a buy-out may be forced to look at debt-financing to complete their transactions.