The volume of private equity-buyouts in the UK fell to its lowest level since 1984, according to the latest states from research house Centre for Management Buyout Research (CMBOR).
Just 31 deals were completed in Q3 this year, with value reaching a 15-year low on £556m.
This puts the value figure for the first three quarters of the year for all buyouts (private equity-backed or not) at £4.3bn, a 77% drop from the same period in 2008.
Private equity’s presence in the UK takeover market has shrunk dramatically. At its peak in 2007, 62% of all buyouts were private equity-backed. In 2009 so far, this has slumped to 32%.
Of those buyouts that did take place, two-thirds were under £10m. The lower mid-market, classed as between £10m and £100m, made up just 26% of all buyouts, down from 46% last year.
There have been two £500m-plus deals in 2009 to date whilst there were eight in 2008 and 14 the year before. There have been four deals in the mid-market (£100m to £500m) compared to 29 in the first nine months of 2008, and 24 in the sub-£10m space when there were 111 last year.
Businesses in receivership are now the most popular form of acquisition by private equity, with 17 deals so far this year, the highest number since 2001. Christiian Marriott, director at Barclays Private Equity, said: “This shows that there are investment opportunities at relatively low entry multiples in companies with recovery potential: private equity is able to provide capital and impetus by getting these businesses up and trading again.”
The number of private equity-backed businesses going into receivership has also risen, from 36 to 41. Marriott added: “Whilst the economic environment is still forcing a number of private equity-backed businesses into receivership, this remains a very small percentage, 0.8% of the overall number of corporate receiverships across England and Wales. Equally, there have been fewer private equity-backed receiverships this year than there were in the last downturns in 1990 and 2001, despite the greater number of private equity deals completed in the run-up to this crisis.”
“History shows that the vintage year with the lowest number of receiverships was 1991 following the 1990 downturn. Similarly in 2003, numbers fell coming out of the 2000/1 downturn, suggesting that periods of economic difficulty may encourage more prudent investment from private equity backers.”