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Q4 investment accelerates

Rate of investment in the UK MBO market accelerated in the final quarter of 2004, according to figures released by KPMG’s Private Equity Group (which tracks UK buyouts with a value over £10m). Thirty-seven management buyouts with a total value of £5.42bn were completed in the UK in Q4 2004.

Overall in 2004, 145 larger buyouts were completed with a total value of £19.35bn. 2004 saw both the highest value and the highest number of deals for four years and represents an increase of 24% by value and 17% by volume from the levels of 2003. The strongest area of activity was the larger mid-market (buyouts between £50m and £250m), which at £6.32bn for the year is at record levels.

Charles Milner, head of corporate finance at KPMG’s private equity group, said: “In 2004 the market has been characterised by strong competition for the best deals, a healthy degree of liquidity realising value from portfolios and continued interest in the asset class from investors. Demand for the best deals is intense and activity continues to be governed more by supply of quality opportunities than demand from private equity investors.”

Last year also saw a reopening of the IPO markets and a return to higher levels of corporate M&A activity. Secondary buyouts have reached record levels and continue to represent a significant part of overall volumes. This has been underpinned by strong continuing appetite from the banks with debt multiples, which markedly increased over the year.

There were fifteen public-to-private transactions during the year at a total value of £4.564bn, representing nearly a quarter of market value in 2004. The average value of each deal at £304m was a record high, including Chelsfield (£1,872m) and New Look Group (£699m).