UK buyouts expected to recover

According to a new study, changing vendor expectations mean that activity in the UK buyout market is set to pick up following a poor final quarter in 2001.

The fourth quarter of 2001 may have been the worst in the UK buyout market since 1995, but 2002 could be a strong year for the private equity industry, says a new survey published by KPMG Corporate Finance.

2001 saw the completion of 124 buyouts with a total value of £18.9bn (E31bn), the survey records, but deal flow collapsed in the fourth quarter. The number of deals dropped by 54 per cent to 22 transactions worth £1.4bn, 67 per cent less than in the previous period.

Commenting on the reasons for the sharp decrease in deal flow, Charles Milner, head of private equity at KPMG Corporate Finance, cited a number of “well-documented reasons, including the global economic slowdown and particularly the tragic events and repercussions of September 11.”

Looking ahead, the survey predicts a significant pick-up in deal flow as owners of businesses looking to sell were adjusting their expectations on price. “As a number of companies come under pressure from banks to restructure or reduce their debt, 2002 could well be a vintage year of private equity buyers”, Milner said. Well-funded private equity firms stood to benefit as vendors’ price expectations were beginning to fall in line with what buyers were willing to pay.