Large buyouts mask European decline

Activity at the upper end of the European buyout market remains strong, despite a substantial tail-off in the overall number of deal completions recorded in the first quarter of 2005.

The first quarter of 2005 saw only 196 private equity deal completions across Europe, a decline of 60 deals compared with the final quarter of 2004 and a drop of 68 compared with the same period in 2004, according to figures from the Private Equity Barometer produced by Incisive Media and Candover

The total value of deals in the first quarter stood at €20.3 billion, meaning that the European private equity market has exceeded €20 billion in value for four consecutive quarters. The figure represents a 29 percent increase on the first quarter of 2004.

However, the market was propped up by a small number of very large deals. The first quarter saw 98 buyout deals completed, 32 percent down on the 144 buyouts completed in the previous quarter and three percent down on the same period in 2004. But the value of these deals at €19.3 billion was only 14 percent down on the previous quarter and 40 percent up on the first quarter of 2004.

With 47 deals completed in the first quarter, UK buyouts accounted for 48 percent of all European buyouts but only 33 percent of total value at €6.3 billion. The UK saw its European buyout market share increase six percent compared with the final quarter of 2004.

France saw a dramatic 63 percent rise in value over the previous quarter in Q1 05, accounting for 26 percent of the European total. By contrast, German-speaking territories saw only €1.7 billion of deals, a 69 percent decrease on the previous quarter and just nine percent of the European total.

European growth capital investments plummeted in the first quarter, with 64 deals worth €692 million representing a 24 percent decline in number of deals and 75 percent slump in value compared with the previous three months.

Early-stage investment, on the other hand, showed strong signs of recovery in the first quarter, with the value of deals at €303 million the highest value seen in the last six quarters and a 116 percent increase on the previous quarter. The number of deals was up 26 percent on the previous quarter at 34.