CMBOR 12-month UK buyout figures

Buyout activity in the UK has dropped 50 per cent by value over the last 12 months, according to figures released by the Centre for Management Buy-Out Research at Nottingham University in the UK. This presents a fairly stark picture for the state of the European buyout market given that the UK accounts for approximately half the European buyout market.

CMBOR figures show that total buyout values for the period July 2001 to June 2002 fell to GBP13.2 billion compared with GBP28.1 million for the previous 12 months. Things were, however, beginning to look up, at least in the UK public-to-private market towards the end of Q2 2002. Although many of those deals have yet to close and so won’t have made it into these figures.

CMBOR’s research shows the overall drop in value is largely due to a decline in deals in excess of GBP100 million total value. Only 11 of these types of deals have completed in the last six months. This contrasts with the period Q3 1999 to Q3 2001 when there were at least ten completed in each three-month period. Only one deal with a value in excess of GBP1 billion has completed this year compared to three in the first half of 2001. Increasing numbers of deals over the last six months have come from foreign parents (accounting for 14 per cent of deals in 2002 compared to approximately ten per cent in 2001).

The notion of falling company valuations is substantiated with the finding that average deal value is at its lowest level since 1998 at GBP24.5 million considerably lower than the 2001 figure of GBP31.2 million.

The number of MBIs has also fallen: only 59 were recorded in the first half of 2002 compared to 82 in the second half and 98 in the first half of 2001.

Family and private companies have dropped as a source of buyouts/buy-ins (from 28.5 per cent in 2001 to 19.2 per cent in 2002).

Mark Pacitti, private equity partner at Deloitte & Touche, commented on the findings: “After the quiet end to last year and continuing economic uncertainty, a deal bonanza was never likely in the first half of 2002.” That said, he added that signs of recovery were becoming evident, particularly in terms of both corporate disposal programmes and VCs looking for exits. There also appeared to be an upturn in IPOs but renewed stock market volatility following the Enron and Worldcom corporate scandals and the recent news regarding the postponed floats of Yell and Focus will not boost confidence and may delay a sustainable upturn.