Value of UK MBOs is up by 39 per cent

KPMG’s Corporate Finance’s latest research shows that total value for larger deals in 2000 was up 39 per cent at £19.95bn compared to £14.38bn in 1999.

The latest research from KPMG Corporate Finance of the larger UK management buy-out sector – defined as greater than £10m – shows that the total value of top end deals reached just under £20bn in 2000 whilst the volume of deals remained constant at 150 (149 in 1999), representing a 39% increase by market value.

The research also shows that the average value per deal is up by 37 per cent on 1999 (£133m compared to £97m). This figure however, is greatly affected by MEPC’s £3.5bn public to private transaction earlier in the year. Excluding this, deal the average value for 2000 drops to £110m, a 13 per cent increase on the average value for 1999.

The total value of deals over £250m in 2000 is double that of the previous year – £13.25bn in 2000 compared to £7.03bn in 1999 – and deals in this range account for almost two thirds of the total value for the entire year. In 2000 four deals exceeded £1bn (MEPC at £3.5bn, United Biscuits at £1.5bn, General Healthcare at £1.3bn, Rank Hovis McDougall at £1.1bn) against only one deal in 1999 – Zeneca Speciality Chemicals at £1.3bn.

There were 40 deals made in the final quarter of 2000 and 41 made in the third quarter. The research shows however that there was a 38 per cent decline in value (Q3 at £5,770m: Q4 at £3,550m) largely attributed to the four £500m plus deals in Q3 (Bourne Leisure at £625m, Memec Group at £790m, Rank Hovis McDougall at £1.1bn and General Healthcare at £1.3bn).

The top five deals in Q4 were Powell Duffryn at £507m, Caradon Plumbing at £496m, McKechnie at £434m, First Quench Retailing at £390m and Peter Black Holdings at £304m.

Charles Milner, UK head of private equity at KPMG Corporate Finance said: “The results of 2000 show a record growth in the UK private equity market with the largest deal recorded in 2000 more than two and a half times larger in value than the largest deal of 1999 (£3.5bn: £1.3bn). 2000 was another record year for fund raising, with the ever increasing availability of funds continuing to fuel the market.”

The average value of UK public-to-private deals has increased in the final quarter of 2000 by 215 per cent to £189m from £60m in Q3. This shows a 75 per cent increase in the average value of PTP deals in 2000 at £257m compared to £147m in 1999. The value of PTP deals increased by 79% in 2000, £9.0bn compared to £5.0bn in 1999. The £3.5bn MEPC transaction had a significant impact on this figure.

Charles Milner continued: “Not included in the figures for 2000 are five public to private transactions with an aggregate value of £1.36bn which were announced but not completed in the year (Burford Holdings at £498m, Fairview Holdings at £307m, Frogmore Estates at £293m, Perkins Foods at £250m and BLP Group at £14m).

“The debt markets are showing signs of greater caution and this is undoubtedly a critical factor in putting deals together in the current marketplace. However, with economic fundamentals in the UK sound, substantial funds available for investment and with continuing restructuring as companies and markets consolidate, we firmly believe that the outlook is far from bleak.”