Private equity buy-outs plummet

The volume of private equity-backed UK buy-outs in the third quarter of the year was at its lowest point for 25 years, according to the latest data from the Centre for Management Buy-Out Research (CMBOR).


The volume of private equity-backed UK buy-outs in the third quarter of the year was at its lowest point for 25 years, according to the latest data from the Centre for Management Buy-Out Research (CMBOR).

The volume of private equity-backed UK buy-outs in the third quarter of the year was at its lowest point for 25 years, according to the latest data from the Centre for Management Buy-Out Research (CMBOR).

Only 31 deals were completed between July and September, the lowest number since 1984.

Unsurprisingly, only two deals were valued above £500 million in the first nine months of the year, however the resilience of the mid-market is also being challenged. There were only four deals between £100m and £500m (2008: 29) and only 24 in the lower mid-market (£10m to £100m), down from 111 last year.

Christiian Marriott, director at Barclays Private Equity, says: ‘Whereas the mid-market had been holding up reasonably well, this has been squeezed throughout the year.’

Another trend identified by CMBOR is the rise in equity contribution for private equity buy-outs, which has increased from 46 per cent of overall deal structures in 2008 to 60 per cent. Senior debt, on the other hand, has decreased to 33 per cent (2008: 40 per cent). Marriott observes that this reflects the tightening of bank debt, but it also shows that private equity firms are more willing to structure deals more conservatively.

As a sign of the times, only one area showed real growth. The number of businesses bought out of receivership by private equity firms increased by 55 per cent to 17, the highest level since 2001. Marriott says: ‘There are investment opportunities at relatively low entry multiples in companies with recovery potential: private equity is able to provide capital and impetus by getting these businesses up and trading again.’ 

Nick Britton

Lexus Ernser

Nick was the Managing Editor for growthbusiness.co.uk when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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