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UK private equity breaks record but loses ground

The UK has seen almost £25bn worth of deals in 2006, but is not riding the private equity wave to the same extent as the US or continental Europe.

So far this year, the UK has seen buyouts and buy-ins worth a total of £24.8 billion (€37.0 billion; $48.7 billion). This is slightly ahead of the previous record total of £24.1 billion that was set in 2005, according to figures from Nottingham University’s Centre for Management Buyout Research.   

The UK witnessed increasing activity as the year progressed, with around £15 billion of deals completed to date in the second half of 2006, compared with approximately £10 billion in the first half. The UK mid-market has had a strong year, with the value of transactions between £100 million and £500 million up 30 percent to £7.5 billion.

However, mega-sized UK deals have been notable by their absence, with the largest deal being the £1.6 billion buyout of United Biscuits by Blackstone Group and PAI Partners in October.

Tom Lamb, co-head of Barclays Private Equity, said: “The dearth of very large deals in the UK is surprising considering the substantial funds that have been raised this year by some of the UK-based houses. It appears that the jumbo funds will either have to increase the bid premia or go hostile in order to bag the elephant.”

Public-to-private deals attempted by UK houses in 2006 frequently failed to complete. A total of £5.1 billion of such deals have hit the books, compared with £7.2 billion last year. In the US, public-to-private activity in 2006 has already exceeded the three previous years combined.

The UK has continued to lose ground in relation to the rest of Europe. According to CMBOR figures, the size of the UK market was the same as the rest of Europe combined five years ago. Two years ago, UK private equity was half the size of the rest of Europe and, in 2006, it is one-third the size.