CMBOR, which is supported by buyout firm Barclays Private Equity and accountants Deloitte, said portfolio companies had been refinanced to pay out £18.8bn and a further £21.7bn had come from selling companies for a profit. The refinancing total was made up of £6.2bn of partial sales and £12.6bn from restructuring companies’ finances.
Tom Lamb, co-head of Barclays Private Equity, said: “Effectively, [private equity fund investors, known as limited partners] 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.”
The European Private Equity and Venture Capital Association (EVCA) unveiled preliminary research in March that showed €60bn (US$72.8bn) was raised by its members last year, more than double 2004’s figure of €27.5bn.
The bumper crop was led by UK-based buyout firms, according to the EVCA, whose figures were compiled by Thomson Financial and PricewaterhouseCoopers.
CVC Capital Partners raised a net €5.985.5bn, the largest sum ever in Europe, while BC Partners was close behind, raising just €300m less than CVC, and Apax Partners and Candover both raised more than €3bn in net money. Barclays Private Equity was in eighth place, raising a net €1.64bn.
Mark Pacitti, corporate finance partner at Deloitte, added: “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.”
Although leisure and retail sectors had dominated the partial exits in 2004, too, at a broadly similar percentage, their 2005 returns of £4.3bn reflected a switch. In 2004, the leisure sector had been responsible for 14 partial sales worth £3.7bn while in the following year it was £1bn. Retail, however, went from £150m to £3.3bn. In company restructurings, the drop in capital returns from the leisure sector were less marked – £5.4bn compared with £5.9bn – while retail boomed (£4.3bn up from £850m).
Timothy Mahapatra, UK head of private equity transaction services group at Deloittes, said the change partly reflected the timings of the original deals with a wave of retail public-to-privates carried out in late 2003/early 2004.
However, the partial sales volume and value in the first three months of 2006 fell, according to CMBOR, which said just 17 partial exits worth £496m had been completed. But the company restructurings total was running at £2.9bn in the first quarter, almost all from the business and support services, food and drink and leisure sectors.
And Pacitti added: “Overall, private equity exits have been healthy in 2006 with £5.2bn recorded so far. But, with deals such as [department store operator] Debenhams and [medical services company] General Healthcare completing, 2006 could be on track to beat 2005, an all-time record year.”
In late April, South African operator Network Healthcare, supported by private equity and property funds Apax, London & Regional and Brockton Capital, agreed to pay £2.2bn for GHG.
But the number of secondary buyouts, of a portfolio company by another private equity firm, has also held up. Last month, Nikko Principal Investments, the European principal finance arm of Japanese bank Nikko Cordial, bought UK debt purchasing company Cabot Financial in a £275m secondary buyout from Barclays Private Equity.
And the public markets are effectively re-open for a deal’s exit route. On May 4, Debenhams re-listed in London at a flotation price of 195p per share to give it an enterprise value of £2.85bn and potentially billions for its backers, CVC Capital Partners, Texas Pacific Group and Merrill Lynch Private Equity, which had paid £1.7bn in 2003.