UK investment levels decline

The UK buyout market has seen deal flow drop 40% in the fourth quarter, according to recent data.

The UK buyout market invested just £1 billion in the final quarter of 2008, the lowest quarterly figure since 1995, according to the latest research from University of Nottingham’s Centre for Management Buyout Research.

The research reveals that staunched deal flow has impacted on the value of investment from the UK buyout market. The number of deals being made peaked at 205 in the second quarter of 2008, but the final quarter has seen just 63 deals to date. This compares unfavourably with the fourth quarter of 2007 when 154 deals were made. However, deal volume in this market has been falling generally since it reached a total of 717 buyouts in 2003, with just 671 buyouts in 2007 and 539 in 2008.

Management buy-ins made up the majority of investments in 2008, for a total of £14.6 billion. However the overall amount invested via management buyouts has fallen by more than 50 percent in the last 12 months, standing at £4.5 billion in 2008 compared with £10.6 billion in 2007.

Some of the year’s largest MBOs were the £2 billion deal for Emap, led by Apax and Guardian Media Group; the £1.3 billion buyout of Biffa by Montagu Private Equity and Global Infrastructure Partners; and the £900 million deal for Abbot Group by First Reserve; and Kohlberg Kravis Roberts’ £500 million purchase of Northgate Information Solutions. These were all take-privates that took place in the first two quarters of 2008. The largest public to private transaction in the fourth quarter was the £9.6 billion buyout of Xpertise Group by Englefield Capital, reflecting the slow in activity. In 2007 there were 24 public to private deals reaching £19.5 billion but there have been just 17 in 2008 reaching £7.5 billion of investment.

There has been a decline in buyout deals across the board, although the lower mid market has been slightly more resilient with the number of transactions between £10 million and £100 million dropping from 165 in 2007 to 119 in 2008. Large buyouts of over £100 million have showed a marked slowdown, with 67 large buyouts totaling £39.1 billion in 2006, compared to just 39 buyouts of the same size, totaling £14.4 billion in 2008.  The average deal size has also fallen in 2008 to 35 million, compared with £68 million in 2007.