Exits recover as European buyouts fall 22%

European deal volume and value continue to slow amid ongoing volatility in the region, according to Q3 CMBOR data.

The overall value of private equity buyouts in Europe for the first three quarters of 2012 was €37.1 billion, down 22 percent from the same period last year, according to a study from the Centre for Management Buyout Research (CMBOR). So far there have been 415 recorded European buyouts in 2012. It is unlikely that this year’s total deal amount will reach last year’s total of 609, CMBOR said.  

The on-going tension in the eurozone and uncertainty around credit continues to reveal itself in 2012, CMBOR said by way of explanation. France particularly saw a decline in buyouts and deal value, the study found. So far this year, French deals have reached a total of €4.3 billion, only one-third of the total value in 2011.  

“Q3 has seen continued uncertainty, with senior debt markets on the continent and uncertainty around French fiscal policy adding to the already difficult conditions. Nevertheless, the number of large buyouts completing in Q3 demonstrates that in the case of strong investment prospects, deals can still be done,” Christiian Marriott, director at Equistone Partners Europe, said in a statement. 

The UK, meanwhile, managed to increase its total share of European buyouts by 19 percent to 35.7 percent. UK buyouts had a combined value of €4.2 billion, which was compared to the €3.2 billion in Germany and €1.8 billion in France, with CMBOR calling the UK's figures a “somewhat healthier performance”. 

Although the overall deal value was down, larger deals were on the rise, CMBOR said. In the third quarter, there were four buyouts recorded with a value of €1 billion or more. The total value of deals in this category accounted for 38 percent of the overall market, which is the highest since 2007. The largest deal of this year so far was EQT’s €1.8 billion buyout of BSN Medical in June, according to the data. 

The number of buyout deals in the lower mid-market (deals in the range of €10-€100 million) dropped during this year. There were 68 deals in the first quarter, 62 in the second quarter and 43 in the third quarter of 2012. In the mid-market (investments between €100 million-€500 million) there were 12 buyout deals, 3 less than in the second quarter and 6 less than in the first quarter of 2012.

The healthcare, retail and technology, media and telecommunications (TMT) sector were particularly good markets for buyout deals, CMBOR said. TMT deals accounted for 17 percent of the overall buyout value in 2012, a 7 percent rise compared to last year. CMBOR recorded a total deal value of €6 billion in the healthcare sector, a significant rise compared to the €4.6 billion last year. These results were however influenced by two large deals that nearly accounted for half of the value of healthcare deals in 2012.

Additionally, the exit market recovered slightly. In the third quarter there were 73 exits, 6 more than in the second quarter, but still less than the 87 exits from the first quarter. Nearly half of all the exits were trade sales. With €10.8 billion, the third quarter of 2012 had the highest combined value of trade sales all year. This includes the $5 billion sale of software company NDS Group to Cisco Systems by Permira and News Corporation, which is the largest exit of the year so far.

The UK has so far been the most active in the European exit market, with 106 exits, nearly half of all European exits by volume. France accounted for 12 percent of exits and Germany for 10 percent.

“There is a big portfolio overhang in Europe and for that to be cleared we need to see both a return of the IPO market and corporate buyers. A general lack of confidence is likely to continue to affect the IPO market placing an ever greater importance on the corporate buyer,” Sachin Date, EMEIA private equity leader at Ernst & Young, said in a statement.

“Private equity houses must adapt how they run their sale processes. They need to prepare for their exit by spending more time thinking of the wider buyer populations and identify all the potential players in the market and where their assets can provide strong strategic synergies,” he added.