Europe continues to dominate LBO market

The number of leveraged buyout deals completed so far this year in Europe remains substantially ahead of the figure in the US, reinforcing the trend seen since 2000, despite the relative decline in European M&A deals numbers.

Some 236 deals worth US$43bn in total have closed in Europe in the year to-date. In the US, the figure is 168 deals with an aggregate value of US$32bn, about 25% less than in Europe.

Within Europe, the number of deals completed so far this year is down by some 25%, to 236 from 312 by May 23 2005. Despite the decline, the value of those deals that have been announced is up by close to a third, from US$29bn to US$43bn for the year to-date.

The US has seen a rise both in the number and total value of deals completed compared with the same period last year.

The rate of completions in the US is up a huge 65% for the year to-date, from 102 deals to 168. The value of the deals is also up, though by a much smaller 28%, indicating a fall in size of the average deal being announced.

The figures for the year to-date are particularly impressive given that both the US and European markets saw record levels of LBO activity in 2005.

In 2005 both sides of the Atlantic set new highs in terms of the number of deals completed, the value of deals completed and also in the size of the average transaction.

The 752 European target LBO deals closed in 2005 had a total value of US$120bn, suggesting a crude average value of just less than US$160m.

The US market also saw a record level of activity, producing 409 completed deals worth US$91bn, giving a US$222m average per deal, around 22% higher than the European figure.

Such averages, however, remain a distinctly crude measure. In Europe in 2005, just 10 deals accounted for US$55.5bn, or 46% of the US$120bn total, skewing the average up by some US$73m per transaction from an otherwise far smaller US$87m.

In the US, the impact of the biggest deals was even more profound. The 10 largest LBOs of 2005 had an aggregate value of US$44.7bn, just short of 50% of the US$91bn total, and again skewing the average hugely upwards.

However, preliminary and necessarily crude figures for the year to-date suggest some narrowing in the gap between the size of the average European and US deal.

So far this year, the crude US average has fallen from US$222.4m for full year 2005 to US$190m for this year to-date, while the average European deal is up from 2005’s US$160m to US$182m.