UK Buyout Market Reaches Record Levels –

Preliminary figures from the Centre for Management Buyout Research (CMBOR) reveal an exceptional year in 2004 for the UK buyout market both for new deals and exits. The year-end figures value the market at GBP20 billion, the second highest value ever recorded and the second consecutive annual rise in the value of completed transactions.

The highest annual value recorded for buyouts in the UK was GBP23.9 billion in 2000.

Exit levels were much more encouraging last year with the total number of exits standing at 258 by the end of November, 11 more than the 2003 total. And the value of exits in 2004 has nearly doubled to over GBP17 billion, by some margin the highest annual total ever recorded. Almost two-thirds (64.4%) of the total value realised however, has come from the 20 largest exits.

Tom Lamb, managing director UK at Barclays Private Equity, says: “This year private equity houses have been able to eat both ends of the candy bar, with deals and exits both booming. The key factor has been the surge in secondary buyouts which are effectively a double play, registering on both the buy side and the sell side. The value of secondary buyouts has risen from GBP3 billion to GBP7 billion, representing an astonishing 36% of deal value. It is also worth noting that the market statistics exclude a staggering GBP8.2bn of recaps (up from GBP2.1bn in 2003), which are effectively additional secondary buyouts where the private equity house sells to itself.”

There was a significant return of large deal (GBP100 million-plus) activity in 2004, with the total soaring to reach 47 in 2004, compared to just 21 deals in 2003. Significantly almost half (22) of the 2004 large deals have been secondary buyouts.

Mark Pacitti, corporate finance partner at Deloitte, commented, “The continued revival of the buyout market has been fuelled by the GBP250 million-plus mega-deals, including the GBP1.75 billion AA buyout and GBP1.35 billion buyout of the Saga Group. There have been 15 such deals in 2004 compared to nine in 2003. With more big ticket deals in the pipeline, including Warner Chilcott at around GBP1.6 billion and NHP at GBP564 million, we may well be returning to the peak levels of 2000.”

The lower mid-market of GBP10 million GBP100 million also attracted significant interest last year. At around GBP4bn per annum, this segment represents just 20% of the overall market but it also accounts for around 100-120 deals providing fertile ground for those houses chasing smaller deals.