While mega deals are boosting the value of the UK buyout market, deal volume has been impacted by a sharp downturn in the UK M&A market, according to a survey by KPMG Corporate Finance. In the second quarter of 2001 the total value of UK MBOs reached GBP7.2 billion, the highest quarterly total to date, but half of this was accounted for by just two deals.
The two mega deals of this quarter included the institutional buyout of BT’s Yell Group by Apax Partners and Hicks Muse Tate & Furst for GBP2.1 billion and Deutsche Morgan Grenfell Private Equity’s buyout of Whitbread pubs for GBP1.7 billion. A further 29 deals accounted for the remaining GBP3.4 billion of activity during the period.
Looking towards the next six months, Charles Milner, head of private equity at KPMG Corporate Finance, says due to economic uncertainty, a number of transactions are being revisited as vendors re-open negotiations at more realistic price levels. This quarter saw three secondary and the first tertiary buyout of Heavy Machinery Group by Bank of Scotland Integrated Finance. “We are likely to see more of this type of buyout whilst IPOs remain a difficult route for private equity exits,” said Milner.
The number of public to private transactions has also been growing. This quarter six of the top ten deals were PTP’s totaling GBP2.3 billion.
The property sector has been particularly active this year accounting for nine of the 18 PTP deals completed in the last six months.
Milner said that although deal volume is slowing down, deals continue to be closed. They are, however, taking longer to complete. He said: “Notwithstanding a decline in the volume of activity, we have not seen the scale of downturn in the volume of GBP10 million+ deals, as some of the more pessimistic commentators predicted. Timing is critical and in the past a realignment of pricing expectations has augured well for private equity buyers.”