Choppy public markets have not scared banks out of the private equity market, a recent study found.
According to the Centre for Management Buyout Research, readily available debt has allowed a record number of firms to refinance loans during the first half of this year. More refinancing transactions have been sealed in the six months to July 2013 than during the same period of any other year since CMBR started gathering statistics on the market.
A more stable macroeconomic outlook also led to a reopening of the IPO market, the study found. A total of £3.9 billion has been collected through four PE-backed public listings so far this year, including £1.5 billion raised by Cinven’s Partnership Insurance last June.
It has been encouraging to see capital markets open up and these recent flotations have traded successfully, which has helped build confidence amongst investors
“It has been encouraging to see capital markets open up and these recent flotations have traded successfully, which has helped build confidence amongst investors that PE-backed IPOs are again an attractive proposition,” commented Sachin Date, private equity leader for Europe, Middle East, India and Africa (EMEIA) at Ernst & Young, in a statement.
That contrasted with the deal activity observed between January and June 2013, which at 81 buyouts was below the 117 acquisitions recorded during the same period in 2012. The total value of deals, at £6 billion, also was down by nearly 30 percent on last year.
While the mid-market held relatively well, the £50 million to £100 million deal bracket saw a major decline, with not even half of last year’s volume and value recorded so far in 2013. “Typically, these businesses are less diversified, operating in a single market with single products and services offerings,” Date said.
“Investors today are on the hunt for multi-sector, multi-product and multi-jurisdiction assets which are able to spread their exposure to fluctuating macro-economic conditions,” he said.
But industry insiders expected the market to recover in the coming months, provided no major macroeconomic shocks significantly disrupt the markets. “Although values and volumes of deals are down, all the indications point to a healthy pipeline, and while we might not reach the record levels previously achieved there should be a positive number of deals completed,” Date said.
A rising trend was the growing involvement of North American firms in the country, which the study saw as a sign the UK currency was still considered by investors as a safe haven relative to the euro. Twelve of the 17 deals worth more than £100 billion, totaling around £4 billion, have so far originated from the US or Canada this year.
Secondary buyouts were found to be the largest source of deals by value, with £2.7 billion worth of acquisitions undertaken in 2013.