BusinessCorporate FinanceMBOs plummet to record lows

MBOs plummet to record lows

Management buy-outs have fallen to their lowest level since 1996, as investors refuse to sell in fear of crystallising their losses, according to the latest KPMG report

Link: MBO activity slumps to seven-year low

In the first quarter of 2003, only 24 companies were sold to their management. The total value of the deals was £3.3bn, according to the KPMG report.

Oliver Tant, head of KMPG’s private equity group said: ‘Conventional wisdom would suggest that we are likely to witness more public to private deals, now that public markets have fallen than a couple of years ago when the markets were at their peak.

‘Companies have lower valuations but private equity houses are not buying them and independent directors and institutional shareholders are not selling them.’

KPMG corporate finance partner Mick McDonagh said the reluctance to sell is rooted in investor desire to avoid crystallising their losses. He said: ‘We are continuing to see more realistic price expectations on the part of vendors but it is still a big psychological step to accept the dramatic loss of value of the past few years.

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