Depressing news for MBOs

During the first three months of the year there were only 25 large MBOs, a third down on the same period in 2001.

And the total value of the deals fell by nearly a half, only reaching £3.1bn. The figures, compiled by KPMG, will not be easy reading for the corporate financiers in the large firms, especially as the flotation and merger and acquisition markets have all but dried up.

But KPMG is putting a brave face on the news. Charles Milner, head of private equity at KPMG, said: ‘The market remains poised to pick up, but activity levels are not sufficient to suggest this will occur in the next quarter…its more likely in the third or fourth.’

Milner puts the depressed market down to the poor exit route prospects available for management teams. He said this has boosted the trend of secondary buyouts, which figured high in KPMG’s analysis. He said: ‘Secondaries are proving increasingly acceptable both as a form of exit for private equity investors and as an acquisition on the buy side.’

The secondary buyout at Young’s Bluecrest Seafood, valued at £137m, was the fourth largest deal in the first three months of the year.

The largest deal was the Unique Pub and Voyager Pub group deal, worth £2bn, followed by Dignity Caring Funeral Services, the £245m buyout from SCI funeral group.

While it might not mean the death of the buyout market, figures published by the Centre for Management Buyout Research support KPMG’s findings.

While admitting the second half of 2001 had been ‘dismal’, CMBOR said there were strong signs of recovery during the first few months of this year.

Tom Lamb of Barclays Private Equity, which together with Deloitte & Touche sponsor CMBOR, said: ‘Although the upturn in headline numbers looks encouraging, calling the recovery would be extrapolating from a dot – one deal does not a trend maketh.’

But there is still money available. According to Deloitte’s Mark Pacitti, there are plenty of venture capitalists keen to invest their cash. ‘But most investors are in no hurry to actually push the deals through to completion,’ he said.

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