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Germany takes the lead in European buy-outs

25 Jun 2001

Germany has stormed into the lead of continental Europe's buy-out league, quadrupling its deal value in 2000 to E15bn on the previous year, according to the latest research from the Centre for Management Buy-Out Research.

Buy-outs across continental Europe as a whole rose 16 per cent to E37.4bn from 1999 levels, although the total deal volume was little changed.

The research, produced in conjunction with Deloitte & Touche and Barclays Private Equity, said the trend, particularly in Germany, had been towards larger deals. The average deal size increased to E74.3m in 2000 from E64.2m in 1999.

‘The 2000 analysis paints a healthy, but far from uniform, picture across the region, although the strong trend towards larger value deals is very much confirmed,’ said Simon Creedy-Smith, European head of transaction services at Deloitte & Touche. ‘The shift of deal types is noticeable, with private equity investor led acquisitions starting to occupy top slots in terms of deal size.’

Graeme White, head of Barclays Private Equity, seized on the German data as confirmation of the long-anticipated upturn in activity stemming from the radical overhaul to the country’s corporate tax regime. And he predicted that activity would continue to accelerate as broader economic reforms began to take root and the country’s private equity industry grew in maturity.

‘The long-awaited explosion of the German buy-out market has finally happened, although this was largely driven by mega deals – the top ten German deals accounted for 75 per cent of the German market by value but only two per cent by number. We expect to see the German mid-market also grow rapidly as there is an increasing focus on shareholder value that is leading to the disposal of non-core activities and the private equity houses are now clearly established as credible buyers,’ he said.

White said the much larger buy-out market in the UK showed how much further there was for the continental European market to develop. (UK deal value in 2000 grew 38 per cent to E37.5bn from E27.1bn in 1999.) German buy-outs only account for 0.75 per cent of GDP, compared with 2.5 per cent in the UK.

The growth in German deal value may have been the outstanding feature of 2000, but France kept hold of the lead in deal volume. It recorded 133 deals, a fall of 6 per cent on the year, compared with 75 in the Netherlands and 69 in Germany.

The research said general manufacturing and telecommunications were the largest industry sectors by value at E6.2bn each, followed by the paper, printing, publishing, and chemicals sectors. Technology sector buy-outs represented 14 per cent of the total number of deals and 18 per cent of the total value.

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