PE hits new record in Q2

The value of private equity transactions in Europe reached a record €33.5bn in the second quarter of this year, according to the Initiative Europe Barometer, which is published in association with Candover.

The tally is over 55% higher than the €21.6bn recorded in the first quarter, and a near 40% increase on the €24.2bn recorded in the second quarter of 2004. The drivers of this growth were buyouts at the middle and upper end of the market, including two of the largest European private equity-backed deals on record.

“The European buyout market has now roared into life in the second quarter of 2005,” said Colin Buffin, managing director of Candover. “There have been a huge number of deals in the middle and upper end of the market as private equity buyers become an increasingly important force in European M&A. At the half way stage, it would seem that 2005 is on target to be another landmark year for European private equity.”

Some 139 buyouts worth €32.6bn were recorded in Q2, an 18% increase in volume terms and 59% higher in value terms than the 118 deals worth €20.5bn logged in Q1. Eight of the top 20 largest buyouts completed were above the €1bn mark and three-quarters of the top 20 were above €500m.

The prevalence of large buyouts was the strongest trend seen during the quarter, with three very large deals – all valued at greater than €1.65bn – accounting for 31% of the total value. Spain saw the second largest European buyout on record in the shape of the €4.3bn Amadeus deal, with Denmark contributing ISS at €3.8bn, and in the Netherlands, Yellow Brick Road was valued at €1.8bn.

The Nordic region captured the largest single share of the Q2 European buyout market by value with €9.8bn logged, including five top 20 transactions.

The UK saw five of the top 20 largest buyouts in Q2, with the value of deals increasing from €6.4bn in Q1 to €7.7bn.

The completion of a number of very large deals in Continental Europe brought a significant change in the distribution of value, however. Despite registering an increase in the value of buyouts, the UK share of the overall market in value terms fell from 31% in Q1 to 24% in Q2.

France saw an increase in the number of deals, but experienced a decrease of 46% in the value of transactions from €5.2bn in Q1 to €2.8bn in Q2. German-speaking regions saw €2bn of transactions, almost identical to the €2.1bn seen in the first quarter, despite registering strong growth in deals from seven to 20.

Benelux saw a decline in both value and volumes, with five deals worth €2.4bn completing in Q2, compared with 14 deals with a value of €3bn in Q1.

Strategic buyers are also aware of the growing strength of private equity. According to another report from Ernst & Young, corporates are concerned about the impact of private equity cash on deal valuations.

At a recent E&Y roundtable, half the participants said they had lost a deal to private equity rivals in the last year.