The volume of private equity-backed UK buy-outs in Q3 2009 fell to the lowest level for a quarter of a century with only 31 deals completed. The value of buy-outs in the same period totalled £556m (€607.9m), the lowest for 15 years, according to the latest data published by the Centre for Management Buyout Research (CMBOR).
The value of private equity-backed UK buy-outs totalled £3.6bn (€3.9bn) in the first nine months, dramatically lower than the overall yearly figures for 2008 (£18.2bn, €19.9bn) and 2007 (£43.4bn, €47.4bn).
Buy-outs from family and private owners represented almost a third of all transactions. Businesses bought out of receivership provided the third highest source of dealflow this year.
Two thirds of buy-outs so far this year have been under £10m (€10.9m). The lower-mid market (£10m to £100m) has seen a significant decline in activity now only making up a quarter (26 per cent) of all buy-outs compared to 46 per cent last year.
The manufacturing and business services sectors have generated the highest volume of dealflow so far this year with 21 and 16 buy-outs respectively. By value, business services makes up almost a third of all buy-outs
Private equity buy-outs as a percentage of overall UK takeover activity has fallen by a fifth (21 per cent) by value from last year. In 2009 so far, they represented 26 per cent by value and 32 per cent by volume. This contrasts markedly to 2007 when 62 per cent of all takeover activity by value consisted of private equity-backed buy-outs.
“The private equity market is not yet showing any significant signs of recovery with the overall value of buy-outs at a level last seen in the mid-1990s,” said Christiian Marriott, director at Barclays Private Equity.
“The number of businesses in receivership acquired by private equity firms has risen by 55 per cent this year to 17, the highest level since 2001. This shows that 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,” Marriott added.
Secondary buy-out activity in 2009 has also fallen sharply, with only 11 SBOs compared to 42 in the same period last year. Many of the SBOs this year have been rescue deals or distressed buy-outs where the business, or its parent, was at risk of going into receivership.
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