The return of the mega-deal (in miniature)

Carlyle’s sale of Holland & Barrett for £1.8bn is the latest in a string of UK mega-buyouts.

UK buyout values have rebounded in the first half of 2017 amid a surge of mega-deals worth more than €1 billion, according to data from the Centre for Management Buyout Research at Imperial College Business School.

On Monday, the board of The Nature’s Bounty Company and its owner The Carlyle Group announced an agreement to sell Holland & Barrett to L1 Retail for £1.77 billion (€2 billion; $2.23 billion). The deal, which is expected to close by September 2017, follows 32 quarters of like-for-like growth at the health retailer.

The news comes on the back of €9.4 billion-worth of buyouts in the UK during the first half of the year, up from a post-referendum lull of €5.5 billion in the second half of 2016.

This growth was driven in part by three sizeable transactions in Q1: Onex Corporation’s buyout of Parkdean Resorts, KKR’s of Calvin Capital, and Cinven and CVC’s NewDay mega-deal buyout in Q1, worth €1.6 billion, €1.2 billion and €1.2 billion respectively.

While transaction sizes are on the rise, they are still a far cry from the scale of leveraged buyouts in the pre-crisis boom of 2007. The largest European deal in history was KKR’s £11.1 billion acquisition of Alliance Boots that year.

Overall buyout value across Europe also grew by more than a third to €35.8 billion in H1 2017, despite volume falling from 310 deals in H2 2016 to 303 in the first half of this year. The figure was boosted by 11 European mega-deals – those with enterprise values of more than €1 billion – in H1 2017, already surpassing the 10 made throughout the whole of last year.

“There’s a lot of liquidity trying to find deals and not enough supply,” Callum Bell, head of corporate & acquisition finance at Investec, which co-sponsored the CMBOR research with Equistone Partners Europe, told PEI.

“We’ve seen both exit and buyer multiples that are at record levels. High quality businesses are getting transacted at very high multiples at the moment.”

Germany was the overall market leader for Q2 2017, recording €5.6 billion of buyouts, compared with just €1.8bn for the UK. The country reported four mega-deals in the first half, including the €2 billion sale of Xella by PAI Partners and investment funds managed by Goldman Sachs’ merchant banking division.

Last year, 95 buyouts were completed in Germany, the highest number since 2008. Its market is now on track to approach that volume again this year.

“They’re probably decoupling from the Brexit issue a little bit,” Bell added.

Bell suggested that although Brexit was still relevant to the UK market, “we’re seeing from these results that Germany, France and the Netherlands are moving on with life”.