According to research carried out by the Centre for Management Buyout Research (CMBOR) and co-sponsored by Deloitte & Touche and Barclays Private Equity, total deal value for continental Europe fell by 13 per cent last year to €31.6 billion, the lowest for two years. Breaking from its tradition of outperforming other European markets, the UK buyout market faired slightly worse, losing 19 per cent of its 2000 value with deals worth a total of €31.1 billion, compared to €38.2 billion. Despite an increase in the number of UK deals, 619 compared to 504 in 2000, these figures represent the first drop in market value since 1993 for the UK. The value of deals recorded in the second half of the year was less than 50 per cent of that recorded in the first six months.
The majority of continental nations saw a similar pattern. The value of buyouts in Germany was halved from €15.1 billion to €7 billion, despite a 40 per cent rise in the number of deals. The total value of French deals also dropped. Conversely, in the Netherlands the value of deals more than doubled despite a drop of 28 per cent in deal numbers. France remained the most active country with 126 deals, followed by Germany where 92 were completed.
Graeme White, managing director of Barclays Private Equity, said: “Private equity war-chests are full and the debt market is deep and aggressive ensuring demand exists. Currently the supply of deals seems to be coming from the less well trawled markets on the continent.” The continent is catching up with the UK in terms of the number of public-to-private deals, with PTPs accounting for 18.5 per cent of deal activity, compared to 25.4 per cent in the UK. Other trends include a pick-up in the number of technology deals and falling exit numbers, down by 19 per cent mainly because of the lack of flotations.
The trend for larger deals persisted: 73 per cent of the total deal value came from 5 per cent of the deals by number in the €250 million-plus bracket. The volume of mid-market deals fell last year, with transactions above €25 million dropping by 23 per cent.
Chris Ward, Deloitte & Touche head of European private equity, said: “In the larger deal segment of the market in continental Europe, the dominant players are UK or US based private equity houses, not domestic firms. With the record amount of new funds raised by UK private equity firms in 2001 earmarked for MBO deals over £100 million, this will continue and we expect a relatively buoyant 2002 as a result, particularly in manufacturing industries as European groups get to grips with rationalising their activities.”
CMBOR also reported that the beginning of 2002 has seen the continuation of last year’s trends, with deal flow holding up but values depressed.