European buyout market continues to grow

In 2000 the value of continental European deals grew for the fifth year in succession, according to CMBOR.

2000 was another record year for buyouts in the UK and continental Europe as the value of continental European deals grew for the fifth year in succession, according to a survey done by the Centre for Management Buy-out Research (CMBOR). The results also demonstrate the strength of the UK market in comparison to its continental European counterparts.

This third edition of CMBOR’s European Management Buy-outs saw a record buyout market value achieved in 2000, with a total deal value of E37.4bn. This was 16 per cent above the previous high of E32.3bn set in 1999. This is the fifth year in a row of value growth after what was a fairly flat market in the early and mid-1990s.

While deal value had grown, deal volume remained static with the same number of 503 deals being completed in 2000 as in 1999. Deal numbers have in fact been fairly constant at a little over 500 for the last four years.

MBIs achieved a record growth in value to E26.2bn, representing an increase of almost 50 per cent compared to the E17.6bn recorded in 1999. By contrast, the annual total value of MBO deals dropped by 24 per cent from E14.7 to E11.1bn.

The UK also showed impressive growth in the buyout market with a total deal value of E37.5bn, 38 per cent above its previous high of E27.1bn set in 1999. But, deal numbers fell in the UK for the third year in a row, with only 583 completions recorded in 2000, narrowing the gap between the UK and continental European totals. The increase in total deal value in the UK means that the average deal size reached E64.4m, compared to the 1999 average of E42.1m.

Against this buoyant background, it is important to note that is just a few countries that are contributing significantly to the levels of growth. Despite an eight per cent fall in volume France, easily remained the most active country for buy-outs in 2000 with 133 deals, followed by the Netherlands with 75 and Germany with 69.

Germany and the Netherlands both saw large increases in deal volumes last year, after activity had slowed in 1999. German deal value almost quadrupled to E15.0bn, easily overtaking France to top the value table. The massive increase in value means that the average deal value for Germany was E218m for 2000, followed by E143m for Norway, E127m for Sweden and E92m for Italy.

Bt contrast, Italy, France, Spain and Sweden showed significant reductions in deal volume. Also, activity has remained notably low in a number of countries, such as Portugal, Norway and Austria.

The value of UK buy-outs relative to the size of the economy remains well ahead of all other European countries with the total buy-out value equating to just under 2.5 per cent of GDP last year. Following the UK are Sweden, Denmark and Germany (the highest GDP in Europe) with buy-out values equating to 1.30, 0.76 and 0.75 per cent of GDP respectively.

The CMBOR research, which also includes statistics on public to private deals and LBOs, is based on its database of over 6,000 continental European deals. The Centre believes that this year’s Review identifies major shifts in individual markets. Looking ahead it sees that prospects for 2001 continue to look good, with the year so far seeing a continuation of the trend towards increasingly large buy-outs.