UK market still suffering P2P hangover

A study by CMBOR has revealed contrasting fortunes for the UK and Continental European buyout markets.

A lack of public-to-private acquisitions in the first six months of 2006 has hit the UK buyout market, with figures falling from €19 billion in the first half of 2005 to €15 billion  ($19.2 billion to $24.3 billion) in the same period of this year, according to research by Centre for Management Buyout Research (CMBOR).

By contrast, the Continental European buyout market reached €55.3 billion in the first half of 2006, up 70 percent on the comparable period of last year. The rise of secondary buyouts on the Continent as corporates continued their restructuring programmes had benefited the European private equity market, added the report.

Tom Lamb, co-head of Barclays Private Equity, which founded CMBOR alongside Deloitte, said in the report that the Continental European buyout market had benefited from an increase in public-to-private buyouts, reaching €23.5 billion compared to €8.2 billion in the first half of 2005: “This contrasts sharply with the UK, where public-to-privates have dried up, due to public company shareholders proving to be incredibly resilient to private equity advances.”

The latest report reiterates concerns voiced by CMBOR in March that the increasing number of public shareholders rejecting bids by private equity firms had led to the UK buyout market getting off to a slow start in 2006. At the time of the March report, the UK buyout market had reached only £3.1 billion of deals.

Scuppered public-to-private bids by private equity firms this year include attempts to buy HMV, a music and entertainment retailer; De Vere, a hotel group; McCarthy & Stone, a UK homes builder; and, according to reports, Kesa Electricals, a UK electrical retailer.

A debt banker told PEO last week that the collapse of a public-to-private deal can cost a private equity firm approximately €1 million in due diligence and associated expenses as well as damaging relations with banks and intermediaries: “They are not in the same volume game as the banks. So why look at everything in the market? Instead of10 take-privates, find three you really want to win and you stand a better change of walking away with one of them.”