European market hits second quarter high

Europe’s private equity market is firing on all cylinders as it records the highest quarter of activity to date, while the UK market has bounced back after a slow start, according to two separate reports.

The European private equity market recorded its highest quarter on record with 293 deals with a value of €42.6 billion ($53.4 billion), according to preliminary figures released today in the Unquote Barometer for the second quarter this year.

The increase in deal value has again been driven by mid to large buyouts with the value of deals in the largest bracket of more than €1.65bn reaching an unprecedented €17.6bn, up 76% compared to the same quarter last year and up 25% on the first quarter of 2006

The number of buyouts rose by 10% during the quarter, from 146 to 162.  Whereas the first quarter total was dominated by Europe’s first deal in excess of €10bn, the second quarter of 2006 saw six buyouts worth more than €1.65bn and 40 deals worth between €160m and €1.65bn, up 100% and 60%, respectively.

The buyout of Gambro, a healthcare company, by EQT and Investor for €4.0bn was the largest completed transaction during the quarter.  Others included the €3.5bn buyout of eircom, a telecoms firm in Ireland, the €3.2bn buyout of General Healthcare Group, a retirement home business and the €3bn buyout of Europcar, a car rental company, and the €1.7bn buyout of Select Service Partners, a catering company. 

The rise in the number of buyouts was generally reflected across European regions, however, the value of deals by region showed a mixed picture, with the Nordic, German and Benelux regions all recording a drop in value, while other regions recorded substantial growth, including the UK and France which experienced growth of 160% and 90%, respectively.

Marek Gumienny, managing director of Candover and sponsor of the report said:  “As predicted, we have seen a big jump in average deal size and deal activity and this isn’t likely to slow over the traditionally quieter summer period.  With a number of large funds closing this year, competition will  intensify and little will be “off-limit”; witness the almost daily  announcements of high profile public to private bids.”

Separately, the latest figures for the UK from the Centre for Management Buyout Research show that after a poor start to the year, with only £3.1bn of buy-outs, the second quarter has now picked up to £9.1bn compared with £11bn at this time last year.

Leisure, business support services and manufacturing are the key industry sectors with respective values of £1.9bn, £1.3bn and £1.1bn.

The statistics from CMBOR, founded by Barclays Private Equity and Deloitte, show that traditional buy-outs from corporates have made a come back, making up over 40 percent of the market by value.

Tom Lamb, co-head of Barclays Private Equity, said: “2006 has seen the welcome return of the corporate vendor representing 43 percent of total market value, the highest share for five years. This is great news for the private equity industry as there is a perception that so called primary buy-outs yield much better returns than secondaries. Many LP’s have been increasingly concerned that the huge growth in secondaries since 2001 – from 5% of the market to 37% in 2005 – could eventually lead to much lower overall returns as private equity consumes itself.”