Private equity market improves
THE NORTH West’s private equity market showed significant signs of improvement in 2010, according to new data from the Centre for Management Buy-Out Research (CMBOR).
Some 17 deals with a combined value of £1.5bn were completed in the North West during the year, compared with just nine deals with a combined value of £270m in 2009.
Almost two-thirds of the 2010 total can be attributed to the £955m sale of Handforth-based Pets at Home to Kohlberg Kravis Roberts, and the M&A transactions remain significantly below the market’s peak of £2.3bn achieved through 40 deals in 2007.
Despite this, Ken Williamson, a mergers and acquisitions partner at Ernst & Young in Manchester, argued that the figures showed that “confidence is gradually returning to the UK buy-out market”.
“Very few large deals grab the headlines, but it is key for a regional market like the
North West to note that overall volumes and values are up in 2010 and 75% of all UK deals are sub £100m.”
Nationally, the private equity market benefited from the return of larger buy-outs.
More than 40 £100m-plus deals were completed during the year, totalling £1.6bn in value – or 88% of the total. However, private equity houses were forced to put in more equity in order to get deals completed. Around 68% of deal values were financed through traditional debt structures with equity investments (including mezzanine loans and loan notes) totalling around 32%.
“This change in deal structure is unsurprising given the fact that banks would only lend up to a point, resulting in increased equity contribution by PE firms,” said Williamson. “Additionally, with the debt markets still lagging behind the increasing deal activity, this trend is likely to continue in 2011.”
The research also showed that business services remained the most popular sector in deal numbers, but that manufacturing became the largest sector in terms of value. Some £5bn of manufacturing deals were carried out across the UK, with the largest being a £2.9bn take-private of Tomkins in September.
Christiian Marriott, a director at Barclays Private Equity, said: “Buyout levels in the manufacturing sector has shown strong growth following a very quiet 2009, accounting for nearly a third of the total deal value this year. The financial services sector has not seen the uptick many expected with a single large deal, the £2bn buy-out of RBS Worldpay, dominating activity in this area.”
