European deal value plummets in H1 2016

Values halved from H2 2015 to €25.6bn as the market ‘normalises’ and mega deals slow, according to research from CMBOR.

The value of European private equity transactions has fallen by almost half in the first half of this year, according to research from the Centre for Management Buyout Research.

The data, produced by CMBOR, an academic research body affiliated with Imperial College Business School, and sponsored by Investec Bank and Equistone Partners Europe, show that 297 deals worth a combined €25.6 billion were completed in H1 2016, compared to 344 deals worth a combined €48.5 billion in H2 2015.

There was a notable decline in transactions worth more than €1 billion, down to three from 12. Meanwhile deals worth between €10 million and €50 million fell from 70 to 65, and deals worth between €10 million and €25 million increased from 29 to 45.

“The statistics reflect a normalisation of activity for private equity,” Investec’s John Clifford said in a statement.

“The market is cooling off, with the EU Referendum one of a number of challenges currently facing deal-doers. This has made larger deals more difficult to complete.”

The data show the UK remains Europe’s most active private equity market, with 88 deals worth €7.7 billion completing in H1 2016. The next most prolific market, France, completed 44 deals worth €5.8 billion. Italy, which accounted for two of Europe’s largest three deals in the period, came in third, with 18 deals worth €3.7 billion.
More than two-thirds of deals by value were sourced from other private equity houses in the last six months.

“There is an increasing stock of private equity-owned companies in the economy, so secondary buyouts are naturally going to be more prevalent,” Equistone investor relations partner Christiian Marriott said in the statement.

“Corporate and private sellers have chosen not to put businesses up for sale in H1 2016, likely because of the macro backdrop and resultant uncertain pricing. Private equity may be seen as a more deliverable and credible option, and makes sense for companies as they grow.”

The largest deal completed in the first quarter of this year was a secondary buyout: the €2 billion purchase of roadside recovery business RAC by CVC Capital Partners. CVC acquired the stake from The Carlyle Group using capital from its $4.5 billion Strategic Opportunities Fund, which is looking for businesses to hold or between eight and 12 years.