European buyout value hits low

Less than E10bn worth of European private equity backed buyouts were completed in the second quarter, marking a four-year low.

The value of European private equity transactions during the second quarter of 2003 has fallen to a four year low, according to figures published today by Initiative Europe.


Although historically a slow quarter, figures for the three months to the end of June with preliminary data show an increase in the number of buyouts completed during the quarter but a sharp drop in the total value to E9.5bn compared with E15.6bn in Q1.


There was a 13 per cent quarterly pick-up in the volume of private equity transactions to 246, from 217 in Q1.  All areas of the market, from buyout transactions and early-stage deals to growth capital financings, registered an increase in deal activity, the research shows.


Only one E1bn-plus transaction was completed during the quarter – the £860m (E1.22bn) acquisition of UK-based packaging group Linpac by Montagu Private Equity. In total, 84 per cent of the buyouts in Q2 were valued at less than E160m. In Q1, seven E1bn-plus transactions were completed.


UK and Ireland continue to account for the largest proportion of European private equity backed buyouts with 40 per cent of transactions in the second quarter involving a UK or Irish company. France remains the continental leader with 34 per cent of buyouts, up from 26 per cent in Q1 2003.


In keeping with the pattern of previous years, the outlook for the second half of the year looks to be more promising. A number of deals announced in the second quarter are yet to complete, including the E5.65bn acquisition of Seat Pagine Gialle, the Italian directories business acquired by BC Partners, CVC, Permira and Investitori Associati in what is Europe’s largest private equity transaction to date.


Q3 has already produced a number of sizeable transactions, including Candover and Cinven’s purchase of BertelsmannSpringer for E1.06bn, Montagu Private Equity’s purchase of Actaris and CVC Capital Partners’ E845m bid for Viterra Energy Services


“Despite the fall in the value of buyouts during the last quarter, low interest rates and stable inflation make this the best buyers’ market ever,” said Marek Gumienny, managing director of Candover. “Corporate restructuring and distressed sellers are driving deal flow across Europe and it seems highly likely that there will be some interesting transactions completed during the second half of the year.”