Private Equity News & Analysis

UK buyout market dips to 25-year low

Only 31 deals were done in the third quarter, a level not seen since 1984. Meanwhile, the number of businesses being acquired out of receivership is the highest since 2001.

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Third quarter numbers recently released by the Centre for Management Buyout Research paint a grim picture of the UK’s private equity market.

Quarterly deal volume fell to the lowest level seen in 25 years, with just 31 deals completed, mostly in the lower mid-market. The value of those deals totalled £556 million, the lowest in 15 years.

There are investment opportunities at relatively low entry multiples in companies with recovery potential.

Christiian Marriott

Numbers for the first nine months of the year were similarly low, with overall deal value falling to £18.5 million, 77 percent down from the same period last year.

“One of the main drivers behind these figures is the steep drop off in buyouts with a value of more than €10 million,” Christiian Marriott, a director of Barclays Private Equity, said in a statement. “Deals valued at under €10 million have accounted for 74 per cent of deals so far in 2009. This percentage has typically been between 50 and 55.”

Marriott cautioned that the UK private equity market is “not yet showing any significant signs of recovery”, but noted that there has been an increase in activity as regards purchasing insolvent businesses.

“The number of businesses in receivership acquired by private equity firms has risen by 55 percent this year to 17, the highest level since 2001,” he said. “This shows that there are investment opportunities at relatively low entry multiples in companies with recovery potential: private equity is able to provide capital and impetus by getting these businesses up and trading again.”