The rise in the value of leveraged buyout (LBO) activity in Europe in recent years has had little effect on the geographic spread of activity, with the few most mature economies accounting for the bulk of deals.
So far this year, the UK, France and Germany have accounted for 62% of all LBOs announced, compared with 65% by the same date in 2005 and not altogether that different from the 70% the three countries accounted for as far back as 2000, when European LBOs totalled US$16bn in the year to June 6, just 24% of their current level of US$63.5bn.
Of the 332 deals announced in the year to-date, 103 feature a UK target, far and away the most popular target, France at number two accounts for 55 deals and Germany 48.
The same three countries are consistently the top target nations for buyout activity, suggesting that growth in buyout activity has seen the existing pattern of investment deepen, with increased spending in mature markets, rather than a broadening into new markets.
Adding the Netherlands, the fourth most active market both this year and in 2005 to the same date, as it was back in 2000, and the figures available show the four most active markets for deal flow accounting for more than 69% currently, compared with 70% last year and 74% in 2000.
The same data show that the total number of deals announced in Europe in the year to-date is running almost 16% behind last year’s level, with 332 deals announced so far compared with 394 in 2005. The current total is around 12% behind the 377 deals announced by the same date back in 2000.
The mid-market shows an even greater concentration of activity in just a handful of countries. Of deals with a disclosed value of between US$50m and US$500m, a huge swath of the potential market, 43%, are accounted for by the UK alone. With 22 of the 51 deals announced so far this year, no other country has seen activity reach double figures. The same was true in 2005 and 2000.
At the upper end of the market the situation is less stark, with eight countries having been host to at least one of the 13 US$500m to US$1bn buyouts announced this year, including Spain, Norway, Switzerland and Greece as well as the more established markets of the UK, France, Germany, Italy and the Netherlands.
Though hardly emerging markets, that spread of targets is in contrast to the situation back in 2000, when only the UK, France, Germany and Italy saw deals of that scale.
In terms of the very biggest deals, mature markets again predominate. The UK, France, Germany and the Netherlands have all seen at least one of the 14 US$1bn-plus buyouts announced this year, as has Sweden, again a highly mature business environment.
Last year, Spain and Denmark had also seen deals on that scale, when 19 were announced in the same period. Back in 2000, there had been just one, in Germany.
This latest data suggest that while the European LBO market has experienced real and sustained growth in recent years, buyers have so far failed, or refused to take that growth pattern and extend it into the EU’s newer “accession” states or beyond.
In part that’s a function of the relative levels of industrial development on the Continent, which continues to live with a real East-West divide. But lower cost Central and Eastern European economies have seen significant levels of industrial development since the 1990s, and in very recent years have increasingly been host to acquisition interest from Western European corporate investors.