Activity in the UK buyout market in the first three quarters of this year has already surpassed activity levels generated throughout 1999, according to figures recently released by the Centre for Management Buyout Research. Last year was a record year, with GBP16.9 million worth of UK buyouts (management buyouts and management buy-ins) being recorded. In the first three quarters of this year the buyout market was worth a combined total of GBP17.4 billion. Behind this figure there is an increase in the size of the average buyout, which is now recorded at GBP41.1 million some considerable way off the long used GBP10 million plus figure constituting the larger’ end of the market.
The stock market apathy towards “old economy” businesses can be in part attributed to the increase in size of buyout deals including the likes of the public-to-private buyout of the property developer MEPC. The property sector accounted for 20 per cent of all public-to-privates recorded in the first three-quarters of this year.
“The MEPC buyout had an enormous impact this quarter and while top end deals have driven the market for the last three years, we saw a drop in the number of deals over GBP100 million in this last quarter. The number of deals over GBP50 million has also fallen for the fourth quarter in a row, and taken together, indicators suggest that the market is overheating, prices are increasing and deals are becoming scarer,” said Chris Ward, head of advisory services at Deloitte & Touche Corporate Finance.
Mega secondary buyouts have also been a feature of the market of late, notably the GBP1.275 million buyout of General Healthcare by BC Partners. This business was bought from Cinven, which owned 80 per cent of the issued share capital following a 1997 management buyout. And the most recent mega-deal to fall at the end of the third quarter of this year was the announcement that KKR, via a company called K-L Holdings established specifically for this transaction, is to buy the non-specialty organics activities of Laporte.
Eight buyouts from previous years have achieved a stock market listing in the first nine months of this year.
Despite these record figures, actual deal numbers were down on those seen in the same period last year. In the first three quarters of 2000 a total of 424 deals were recorded, compared to 475 in 1999.