In the first six months of last year,
The four largest deals completed in the first half of 2008 were Apax Partners’ and Guardian Media Group’s acquisition of UK publisher
“What is debatable is the exact way in which the credit crunch is hitting the middle market,” Christiian Marriott, investor relations director at
However, the general economic uncertainty in the UK is choking the supply of companies coming up for sale, said Marriott, adding: “There are few companies coming up that are good and those that are, are being pretty aggressively picked over and bid for. So actually, the multiples are still pretty high.”
Previously, he said, businesses that still required work could be sold for a good price, but now only “the very best ones” are being put on the auction block by private equity firms.
This was more of a reflection of the skewed nature of the market in the last few years, said Steve Tudge, managing director of Manchester office of UK mid-market firm
“It’s fair to say that the market 12 months ago and prior to that was pretty odd,” said Tudge. “There was such a demand for business that it created supply of a number of companies that probably shouldn’t have been funded, the market was so conducive to deal-making that it was easy to get a good price. Everything’s tightened now and deal flow this year has been much more patchy.”
Tom Lamb, former co-head of Barclays Private Equity, who is stepping down but will continue to chair the European-focused firm’s investment committee while the current fund is still active, said in the report that “private equity houses solely focused on the UK are unlikely to deploy much of their investors’ capital in coming months”.
Despite this, UK-focused ECI Partners has closed three deals so far this year.
“We normally do five in a full year so we’re pretty much on track,” confirmed Tudge, in reference to the acquisition of a 60% stake in i-Level Group in a deal that values the digital media business at £45.5m; the take-private of pharmaceutical research company Premier Research Group; and the management buyout of DLP, a manufacturer of adapted bathroom and kitchen products for assisted living. “We have focused on businesses with growth drivers,” he said.
Even with its European remit, Barclays Private Equity has been more cautious this year but has not shied away from deal-making, acquiring German automotives parts business Novem from London-listed 3i and Taros Capital, a subsidiary of Dutch investor AlpInvest; backing the buyout of UK high street broker A-Plan Insurance; selling branded shoe retailer Kurt Geiger to Graphite Capital for £95m and Phase Eight to a Kaupthing-led consortium in a deal that valued the womenswear retailer at £51.5m; and investing in France’s Martek Power Group.
“We’ve definitely picked our spots this year,” said Marriott. “We are always selective about companies and management teams but we’re also mindful about which parts of the economy will be resilient.”
Ian Nolan, head of UK buyouts at
“We’re part of a pan-European team so we look to leverage sector knowledge and I think that that is a much better model in the current situation, said Nolan.
“The Ultralase deal, for example [a UK eye surgery group acquired in January of this year for £174.5m], came from an equivalent business we had in Spain called Clinica Baviera, and sometimes the knowledge transfers the other way,” he said.
“Would I fancy being a UK fund at the moment, without the benefit of transferring knowledge and funds across boundaries? Not so much, but then, I would say that,” Nolan added.