Refinancing levels leapt to £19bn in 2005, according to statistics on private equity exits from CMBOR. When added to the £21bn of exits for 2005, a total of £40bn of liquidity has been realised for the private equity industry.
The total exit value for 2006 has reached £5.3bn so far. Leisure, manufacturing and business support services are the key industry sectors with respective values of £2.7bn, £0.9bn and £0.7bn.
In 2005, refinancing of leisure and retail businesses accounted for 75% of the total cash realised. This trend resulted from leisure and retail businesses, which traded very strongly in 2004 and early 2005, benefiting from significant cash returns to shareholders, such as special dividends and sale and leaseback transactions. With deals such as Debenhams and General Healthcare completing, 2006 could be on track to beat the record £21bn exit value for 2005.
Looking at the huge shift towards refinancing Tom Lamb, co-head of Barclays Private Equity, said: “These numbers go a long way to explaining why limited partners have been in such a frenzy to invest in private equity funds in 2005. Effectively they have had a huge amount of cash returned to them, certainly double returns on previous years. The key question, however, is whether this is a one off blip and limited partners are piling into private equity at the wrong time.”