U.K. buyouts continue to fall by both value and volume, according to data from the Royal Bank Private Equity / Unquote U.K. Watch. Yet, in spite of unpredictable market conditions, deals are still getting done.
The research provides a 12-month view of key trends in the U.K. buyout market. It also reveals falling average price/earnings ratios for buyouts in the last three months to levels not seen since 1996.
While deal value rose to a nine-year high of GBP23.5 billion this summer, it fell in September to GBP21.33 billion and the number of deals fell from a high of 155 in May and June to 132 by the end of September.
Mark Nicholls, managing director of Royal Bank Private Equity said the shifts reflect the unstable economic climate since the first quarter of 2001, magnified by the terrorist attacks on the U.S.
“The decline in number of deals and downward trend in p/e confirms the trend we have seen in the market over the last six months when growing uncertainties had already made their mark on the valuations that private equity players are putting on target companies,” he said.
But deals are still being sourced and investments made. There will continue to be companies seeking to dispose of non-core businesses and investors who see growth opportunities in them, Nicholls added.
Figures also highlight the equity component of buyouts without mezzanine finance (101), rising from 39% six months ago to 43.8% by October, while gearing levels dropped from 57.9% to 56.2%.
On the other hand, deals using mezzanine finance (31) saw the equity component of financing packages drop from 32.7% a year ago to 31.8%.