Corporate buyouts back in fashion

So far, 2006 has seen the welcome return of the corporate vendor. Statistics from the Centre for Management Buy-out Research (CMBOR) show that traditional buyouts from corporates have made a dramatic comeback, making up over 40% of the market value – the highest share for five years. The increase in corporate buyouts appears to have been driven by the current global M&A boom. Tom Lamb, co-head of Barclays Private Equity said: “Corporate predators often spit out the unwanted parts of acquisitions in the form of buyouts.”

This is great news for the private equity industry as there is a perception that primary buyouts yield much better returns than secondaries. Many LPs have been increasingly concerned that the huge growth in secondaries since 2001 could eventually lead to much lower overall returns as private equity consumes itself.

Despite the increased activity in the corporate buyouts space, CMBOR’s research reveals there has been a lot of confidence in the public arena. Public company shareholders have proved incredibly resilient to private equity advances this year and the drop in public-to-private completions makes up most of the £4bn fall in deal value from £13bn to £9bn. According to CMBOR data, there has been a huge dip in public-to-private deals so far in 2006, with a value of only £1.5bn completed, compared with £5.2bn for the same period last year, a dramatic decrease of 72%.