The Centre for Management Buy-out Research, a UK buyout market analyst founded by the private equity arm of Barclays and accountant Deloitte, has published results showing in the first half of 2007 deal volume of more than £25 billion ($50 billion, €37 billion) nearly equalled the record £26.5 billion total for the entire year in 2006.
US buyout firm Kohlberg Kravis Roberts’ acquisition of Alliance Boots at £11.2 billion accounted for nearly half this figure. Although if this figure is deducted the £13.9 billion volume is still up by almost a third on the first half of 2006.
The survey also revealed public to private deals in the first half reached record levels of £14 billion reflecting two thirds of total buyouts, despite real resistance by many shareholders.
There have been £11 billion of funds raised this year which is over half the record total of £20.2 billion set in 2006. Retail was the most popular sector accounting for £12.4 billion of volume up by over three times from £3.3 billion last year.
The research comes as a survey by White & Case and In-House Lawyer revealed 97 percent of some of Europe’s main buyout participants believe the current bull run will continue for at least the next six months.
The same number also said lending volumes will increase or remain steady during the same period. The survey was polled from senior figures at leading bank, buyout partners, insolvency practitioners and turnaround specialists. Seven out of 10 respondents said further increases in the debt multiples in European buyouts can increase.
However 59 percent of respondents also said the current market was unsustainable and 79 percent thought the buyout bubble would burst in six to 12 months’ time. About 94 percent said new financing structures would surprise investors during debt restructurings, while 90 percent said covenant-lite loans would change the timing and severity of these.
This scepticism echoes a negative report issued by rating agency Moody’s today criticising the level and the nature of debt available to buyout firms.