Mark Hammond, head of
BoSIF provides both the equity and debt for leveraged buyouts, enabling the management team to take a greater proportion of the equity. Some have said that this model might be less appealing to those contemplating a buyout in the current environment.
“At the moment, it might be better for management to split the provider of debt from the provider of equity in a deal. The debt provider does not mind if the business struggles, as it can possibly take on more equity,” said one private equity executive.
A legal source added: “The model of integrated finance does not suit buyout teams as well in the current environment. BoSIF did lots of deals last year but we have not seen it appear as often on transactions this year.”
“There are limited exit routes for integrated finance deals too. IPOs are not an option and secondary buyouts are not possible where a deal is highly leveraged already,” said another market participant. This might make BoSIF reappraise its current position.
However, Hammond dismissed this. “We have done five new investments this year. That is a reasonable amount considering the current market environment,” he said.
The largest was April’s £143m development capital investment in
Last year, BoSIF completed significantly larger transactions, such as the £783m buyout of social housing maintenance provider Keepmoat, and the £925m buyout from Whitbread of David Lloyd Leisure in conjunction with London & Regional Properties.
Hammond said the bank had no particular policy to turn away from larger deals, adding: “This is just a reflection of the market as a whole: there are very few vendors of bigger businesses at the moment.”
He maintained that parent company HBOS, which is currently in the process of raising £4bn through a rights issue, had not changed its policy regarding the integrated finance function.
“Our team is still one of the largest in the buyout space. Our portfolio is in a good condition and we continue to look at deals put before us,” Hammond said. However, he did not rule out changes, including a possible contraction of the unit.
Looking ahead, he did not expect any recovery in the immediate future, saying: “For the next three months we are not expecting large numbers of buyout transactions in the UK.”