Buyouts experience drop in Q1

The European private equity market has had a quiet start to the year, with deal values and volumes well below the levels seen in Q4 2004, according to preliminary figures for Q1 from the Initiative Europe/Candover Barometer.

“This year has started in a predictably quiet fashion in terms of number of deals completing, but the return of the mega-buyout market has made for an interesting quarter,” said Marek Gumienny, managing director of Candover. “Deal values are on the up, and while deal volumes will no doubt pick up as the year progresses, the return of the trade buyer is a serious competitive threat.”

The total value of private equity transactions was €20.3bn in the first quarter of 2005, an increase of 29% on the €15.7bn recorded in Q1 2004, but down 25% from the €25.5bn recorded in Q4 2004. The total value of deals remained above €20bn for the fourth successive quarter.

In terms of volume, 196 private equity deals were completed in the first quarter of this year, down from 264 in the first three months of 2004.

Buyouts dominate the figures. Overall, 98 buyouts with a total value of €19.3bn were completed, down from 144 deals worth €22.5bn in Q4 2004. However, the total is 40% higher than the €13.7bn of deals logged in Q1 2004.

The completion of a number of very large transactions boosted deal values in the first three months of 2005. They included Rexel at €3bn, Warner Chilcott at €2.3bn, Saur at €1.1bn and Tank & Rast at €1bn.

The value of deals greater than €1.65bn represented 28% of the total deal value in the quarter, up from just 9% in the prior quarter, while the value of deals in the €160m–€1.65bn range fell to 55% from 72%.

The UK accounted for approximately half of the European buyout market by volume and a third by value. Europe’s largest market has held up well, increasing its share to 48% by volume of deals, and to 33% by value. The UK fielded six of the top 20 European buyouts during the first quarter, double that of the previous quarter.

In France, deal volumes fell by 27% compared with the prior quarter, but the region saw a 63% increase in the value of buyout deals, from €3.1bn to €5bn. Two deals, Rexel and Saur, accounted for more than €4bn in value. This substantial increase meant France accounted for 26% of the European buyout market.

Benelux countries increased the value of deals by 54% to €2.98bn, representing 15% of the buyout market, thanks to the completion of two large deals in the Netherlands and one in Belgium.

But the value of deals in Germany declined by 69%, from €5.3bn to €1.6bn, with the country accounting for just 8.6% of the total European deal value, down from 23.7% in the previous quarter.