UK buyout deal value plummets 93%

Buyout firm Candover has released a bleak industry report which refers to the ‘demise’ of the UK buyout market and says banking sector problems caused European deal values to hit their lowest level in more than a decade.

The deal value of the UK buyout market has been hit hardest by the “current reverberations” in the global financial markets, experiencing a 93 percent fourth quarter decline, according to research from UK buyout firm Candover.

The firm’s fourth annual “Barometer” study went so far as to refer to the “demise” of the UK buyout market,

Barometer for

stating that it is now only the third most active European country in terms of private equity activity by volume and ranks second-to-last by value.

The UK has been hit hardest by the current reverberations

The Candover Barometer

The UK's buyout volume in the final quarter saw an almost two-thirds decline from 36 deals to just 13, while value dropped 93 percent, or from €4.4 billion in the third quarter 2008 to just €338 million in the fourth quarter. The UK’s largest buyouts for the fourth quarter, according to the report, included OpenGate Capital’s acquisition of UK modeling agency Models 1, for an estimated €79 million; Cyrte Investment’s purchase of television production firm RDF Media, for an estimated €61 million; and Dunedin Capital Partner’s acquisition of the Rathbone Trust International, now Hawksford International, for an estimated €30 million.

Germany saw a similar drop in buyout activity with deal numbers dropping from 34 in the third quarter 2008 to just 13 in the fourth quarter, with a decline in value from €4.3 billion to €1.2 billion, or 73 percent. Germany’s largest buyout was an estimated €30 million investment in life insurance firm by Augur Capital.

Candover found private equity deals across Europe declined in value by 59 percent year on year, from €20 billion in the fourth quarter 2007 to just €8 billion in the fourth quarter 2008.

“European private equity investment activity plunged to depths not seen for over a decade amid ongoing problems in the banking sector,” the Candover report said.

The fourth quarter's slowed deal pace contributed to the decline in value, with deal volume falling 55 percent from 166 deals in the same period 2007 to just 75 completed deals across Europe in the final quarter 2008, according to the survey.

Aggregated European buyouts were valued at €7 billion in the fourth quarter, a big drop compared to what the survey called the “relatively modest” €17 billion for the previous quarter. The complete lack of transactions recorded in the largest deal size bracket, of €1.65 billion and above, contributed significantly to this large value slide, the study found.

Mid-market buyouts, covering deals worth between €160 million and €1.65 billion, recorded a fifth consecutive quarterly decline in value, 56 percent down from €9.3 billion to €4 billion. Candover cited “issues with the banking sector” as contributing factors for this slump.

The overall value of European private equity transactions for 2008 also showed a marked decline, with a drop of 59 percent compared from €198 billion in 2007 to just €87 billion in 2008.