European mezzanine financing in 2002 was the second highest on record, according to a survey carried out by Initiative Europe.
A total of E3.2bn of mezzanine financing was deployed in European transactions last year. Although 24 per cent down on the previous year, the total volume was boosted by a strong second half, when E2.2bn was provided to help fund European buyouts, comparable with the 2001 high water mark of E2.4bn invested in the first half of the year.
Europe’s two largest mezzanine transactions were both undertaken in the second half of last year. In its acquisition of Coral Eurobet, Charterhouse Development Capital used E330m of mezzanine financing, as part of a E900m debt package arranged by Lehman Brothers. Hutton Collins marked its debut deal following the launch of a E600m mezzanine fund, co-arranging E300m mezzanine facilities alongside Royal Bank of Scotland for the E1.9bn acquisition of Télédiffusion de France by Charterhouse, CDC IXIS Equity Capital and Caisse des Dépôts.
“During 2002, we saw a number of significant developments in the European mezzanine market,” said Rory Brooks, director at Mezzanine Management. “Many of the larger buyouts in Europe are now being financed with significant mezzanine tranches, which, we believe, reflects both the maturity of the mezzanine market and an increase in the availability of mezzanine for investment.”
However, the average size of mezzanine in private equity transactions has remained constant at approximately E38m. According to the report, this is in line with 2001 and reflects the prevalence of mezzanine in mid-market transactions.
The UK market has historically accounted for over half of all mezzanine investment across Europe by value. However, in 2002 the UK’s market share fell from 52 per cent to 35 per cent while the amount of mezzanine invested in France more than doubled to 36 per cent from 15 per cent in 2001.
Germany accounted for 26 per cent of the total value of mezzanine invested across Europe, double the number in 2001. However the bulk of this went to two buyouts, EQT Partners’ acquisition of Haarmann & Reimer and Doughty Hanson’s purchase of Auto-Teile-Unger.
“The use of mezzanine in non-buyout transactions has become increasingly popular as corporates across Europe are looking for other forms of funding for expansion, as well as balance sheet financing and restructuring,” said Brooks. “Despite the current tough economic environment, we believe that the mezzanine market will continue to grow in the long-term as a flexible form of leveraged finance for deal sponsors and companies.”