UK Buyouts Already Up 67% On Whole Of 2009 But Momentum Uncertain

28th Jun 2010 14:32

By Marietta Cauchi Of DOW JONES NEWSWIRES LONDON (Dow Jones)--The total value of private equity-backed buyouts of U.K. companies in the first half of this year was GBP7.9 billion, already 67% higher than the transaction value of deals for the whole of 2009 but the increase was powered by activity in the first-quarter and volatility in the equity markets and regulatory uncertainty mean a full recovery is by no means guaranteed, according to research released Monday. Secondary buyouts where private equity firms sell to each other have dominated activity, accounting for GBP4.8 billion, or 60% of the total value of the buyout market, said the Centre for Management Buyouts. The sale of clinical testing company Cerba European Lab by IK Investment Partners to PAI Partners and Cinven Group's acquisition of diagnostic company Sebia from Montagu Private Equity are just two examples of secondary buyouts. Meanwhile the average size of buyouts has more than doubled to GBP91.2 million, from GBP39.5 million last year which is the highest average buyout size ever recorded with the exception of 2007 which saw the height of the buyout boom typified by the GBP11.1 billion buyout of U.K. pharmacy chain Alliance Boots by Kohlberg Kravis Roberts. But experts say that sales remain challenging in particular to the public markets and trade buyers. "The exit market has remained quiet in 2010 in line with 2009 activity levels," said Christiian Marriott, Director at Barclays Private Equity which sponsors the research. "A number of large flotations were anticipated this year but renewed stock market turbulence has held back the IPO market, with only two private equity-backed IPOs taking place in the U.K. so far," he added. These are Jupiter Fund Management and Cambria Automobiles with market capitalizations at commencement of trading of GBP755 million and GBP50 million respectively. Leverage remains a thorny issue with potential buyers and investors especially with volatility in global equities and uncertainty around future capital gains tax, said CMBOR. Public markets tend to view private equity-owned companies with more caution because of the amount of debt taken on by the buyout funds to finance their original acquisition with many adding more debt to refinance during ownership and pay themselves dividends. "We may however see a gradual increase of sizeable flotations in the second half of 2010, particularly where firms are willing to reduce debt levels before or after IPO," said Marriott. -By Marietta Cauchi, Dow Jones Newswires; +44 207 842 9241; [email protected] (END) Dow Jones Newswires June 28, 2010 09:32 ET (13:32 GMT)