The number and value of UK management buyouts above £10 million has fallen in the first quarter of 2002 compared to the same period last year. According to KPMG Corporate Finance, so far this year 25 deals worth £3.1 billion have been completed, down from 36 deals worth £5.6 billion in 2001. Although these figures represent a 31 per cent drop in the number of deals and a 44 per cent fall in value the accountancy firm is predicting a possible increase in activity by the end of the year.
Charles Milner, head of private equity at KPMG suggests the market has bottomed out and is ripe for an upturn. “The market remains poised to pick up, but as yet the activity levels are not sufficient to suggest that this will occur in the next quarter but is more likely in Q3 or Q4. Both debt and equity funding is available to execute quality transactions, however global economic uncertainty is taking its toll on volumes.”
With deal volumes similar to those for the final quarter of 2001, the market appears to have reached a low point. However, total deal values were twice that of Q4 2001, thanks to the £2 billion acquisition of the Unique and Voyager pub groups led by Cinven. In the first three months of the year there were only four other deals worth over £100 million and the average deal value fell 19 per cent, to £126 million, compared to Q1 2001.
Milner adds: “Once economic uncertainty eases, corporates considering disposal programmes may start to execute their plans and private equity investors sitting on large funds will be well placed to take advantage.” He believes bleak exit prospects are one of the factors depressing the level of buyout activity at the moment.
Public-to-private deal activity has also slumped back to 1996 levels. Only three deals worth a total of £108 million were completed in the first quarter of 2002, compared to nine deals valued at £2 billion last year.