The first quarter of 2003 saw the lowest number of completed larger UK management buyouts (with a value of over £10 million) since 1996, according to KPMG Corporate Finance. There were 24 deals with a total value of £3.3 billion recorded for the quarter. Of these, the largest deal of the quarter was the tertiary buyout of Gala Group.
Activity levels are picking up, but this has not yet materialised into completed deals. Mick McDonagh, corporate finance partner does not expect any visible signs of market recovery in the foreseeable future. “With gloomy reports about the prospects of the global economy and fears over prolonged geo-political instability the pressure to buy is not so immediate. Even if the perception is that the markets have hit the bottom, it is not in an investor’s best interest to have prolonged exposure to a situation where there is no recovery in sight. Private equity houses look to be biding their time.”
The quarter has also been quiet for public-to-privates with only three deals with a total value of £146 million completed. These were Firth Rixson (£106 million); signature Restaurants (£25 million) and Rolfe & Nolan (£15 million). For an overview of legal and regulatory issues in public-to-privates across Europe see the legal special report in EVCJ’s April issue.
With the public markets down more public-to-privates might be expected to emerge, but the reality is the converse, according to Oliver Tant, head of KPMG’s private equity group. “Companies do have lower valuations, but private equity houses aren’t buying them and independent directors and institutional shareholders aren’t selling them,” he said.