Private Equity News & Analysis

UK sees shift to take-privates

Buyout volumes for 2008 are down just 4 percent on 2006, says the Centre for Management Buyout Research, with public markets sustaining dealflow.

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Activity in the UK buyout market for the first nine months of 2008 was only 4 percent lower than the same period in 2006, according to new figures from the Centre for Management Buyout Research.

With 448 deals worth a total of £16.8 billion (€21.2 billion; $29.7 billion) completed in the first nine months of the year, activity is not far behind 2006 levels, when by the same point in the year 539 deals with a value of £17.5 billion had been completed.

What we are seeing now is the market reaching a more settled level, albeit one that reflects the current poor economic climate

Christiian Marriott

Secondary buyouts dropped “slumped” according to the research, accounting for just 12.2 per cent of all deals so far this year, compared to 18.9 per cent in 2007. This is the lowest level for five years.

Buyers moved their attention to both family-owned businesses and the public markets.

An effective increase in capital gains tax liabilities for many private entrepreneurs and family business owners drove them to exit their companies ahead of an April 6th deadline. As a result 2008 had the busiest first quarter on record.

Subsequently 46 percent of all buyouts this year have involved targets owned by either private entrepreneurs or families: the highest proportion ever.

The five largest deals to complete so far this year have been public-to-privates. Acquisitions such as Apax and Guardian Media Group’s £1 billion joint acquisition of EMAP and the £1.7 billion Biffa buyout by Montagu Private Equity and Global Infrastructure Partners, have contributed to the fact that the value of take-private deals in 2008 already stands at £7.5 billion, up 24 percent on the whole of 2006.

“Although public-to-private deals hit £19.4 billion in 2007, this figure included Alliance Boots at £11.1 billion, so it could be argued that public-to-private activity this year compares favourably to the heady days of 2007,” said Christiian Marriott, director at Barclays Private Equity

Commenting on the UK market in general, Marriott added: “What we are seeing now is the market reaching a more settled level, albeit one that clearly reflects the current poor economic environment.”