Investment in UK private equity fell to its lowest total since 2003 last year, with the fewest number of deals completed since 1993.
The latest report by data gurus CMBOR – the Centre for Management Buyout Research – make for grim reading. The total deal value for last year stands at £19.1bn spread across 549 deals, a 58% crash on the previous year’s figures of £45.9bn in 671 deals.
Christiian Marriott, director at Barclays Private Equity, said: “Last year started off in good shape with the strongest quarter one on record. Subsequent quarters however all witnessed marked falls in buy-out activity as the market squeeze has tightened. To set today’s figures in context, the size of the market in quarter four 2008 is not considerably higher than the largest European buyout fund raised in 1995.”
The hardest hit area of the buyouts world came in deals valued over £500m. In 2007, this bracket raised a total of £27.5bn across 15 deals. The figure for last year stands at £8bn, the lowest since 2004, invested in eight deals, the lowest number since 2003. The mid-market also saw a significant drop-off, with just £5.7bn invested in 31 companies compared to the previous annual figures of £11.5bn in 52.
The support services sector has emerged as the leading destination for private equity money, attracting £6.4bn in 2008 – £1bn down in 2007’s number, but now accounting for 33.4% of total value rather than 16%.
Retail, however, took an almighty battering. In 2007 it was the sector to be in, with over £14bn worth of investment, 31.2% of the total private equity invested in the year. In 2008, the figure was just £612m, or 3.2% of the total.
Marriott concluded: “Where the market goes from here is anyone’s guess. If senior lenders return to the buyout market and business sentiment begins to improve, buy-out activity should increase in first half of 2009, but there is still a lot of uncertainty out there.”