Time to exit is receding

The backlog of exits accumulated since the M&A lull of 2000 may be starting to clear, according to a new report published by Barclays Private Equity and Deloitte. Exit value year to date has reached a staggering £13.7bn, compared to £8.8bn during the whole of 2003.

The average time to exit is also decreasing. The first half of 2004 saw the average period decrease to just over 61 months. This is inside the typical target exit period for buy-out investment, which is normally 36 and 60 months.

The exit period steadily increased throughout the 1990s from around 42 months to more than 70 months by the end of 2003. This reduction applies mainly to larger buyouts, however. There remains a surprisingly large number of un-exited mid-market and small deals within private equity portfolios. More than half of the £100m plus buy-outs completed in 1999 have now been realised, compared with a third of the £10-100m deals and only a fifth of the sub £10m deals. Generally speaking, the surge in exits brings back balance to the private equity market.

“Demonstrating an ability to realise investments is particularly vital for the many private equity houses seeking to raise new funds next year,” said Mark Pacitti, private equity partner at Deloitte. “They are leaping on opportunities provided by the improved stock market, the return of trade buyers and the increased acceptance of secondary buyouts.”

The report, compiled by CMBOR, also said that receiverships fell in the nine months to September to 65 from a total of 107 in 2003.