Buyouts making a recovery

After suffering a decline for two years running, the UK buyout market has levelled out and is set to match the value reached in 2002, according to preliminary year-end figures from the Centre for Management Buy-out Research.

The data, sponsored by Deloitte & Touche and Barclays Private Equity shows MBOs worth a total of £14.5bn were completed in 2003 compared with £15.3bn last year. With a further three weeks to be accounted for the end of the year, the full total is expected to at least equal that recorded in 2002.

The last quarter has proved the strongest for two and a half years, with value surging from £2.3bn to £4.9bn. However Tom Lamb, managing director UK of Barclays Private Equity warns: “While this is clearly encouraging, it should be noted that figures have been skewed by two mega deals: the £2.5bn buyout of the Scottish & Newcastle pub estate and the £1.7bn delisting of Debenhams.” Remove these transactions, he says and the market is still fragile, propped up by the mid-market, in particular the £25m-£100m range which has actually grown by over 20% this year.

The research reveals management buy-ins are accounting for an increasing chunk of the buyout market – 76% of total value compared with 71% last year and 55% in 2001.

Public-to-privates were another prominent feature. Delistings accounted for over a quarter (26%) of buyout market value against 18% last year, boosted by the Debenhams deal. The number of PtPs was also up significantly on 2002 with 35 recorded to date compared with 22 last year.

Lamb says: “PtPs characterised the buyout market hey-day so their comeback provides encouraging signs that deal conditions are improving. However much of the low hanging fruit has now been taken off the stock market so it is unlikely that PtPs will ever match the 39% share of the buyout market achieved in 2000.”