However, as the market commences the final quarter, it looks like this record year for buyouts might be remembered for very different reasons. The correction in the credit markets in Q3 and the likely knock-on effects could see buyout activity in Q4 being significantly depressed, as debt availability for larger deals dries up.
Exit values at the end of Q3 are down 33% on last year at £18.2bn from £27bn, a strong contrast to this year’s buyout value of £38.5bn. Secondary buyouts accounted for over half of all exits over £250m although a slowdown is predicted in light of reduced debt availability making way for more trade buyers should pricing ease.
Fund raising has continued to be very high in 2007, almost reaching £15bn and matching the rate set in 2006, when a record total of £20.2bn was raised.
In terms of sector, business and support services and the TMT sectors have greatly increased at £5.6bn, up 55% and £5.2bn, up 58%, while leisure is significantly down by 80%.
Mark Pacitti, corporate finance partner at
Pacitti continues: “A further consequence of the credit crunch on private equity is the likely drop in both public-to-private deals (£18bn and 47% of this year’s deal value) as well as reduced exit opportunities – secondary buyouts have been the preferred exit route in recent years, but they do rely on strong debt markets. However, the door is now opening for trade buyers.”