PracticeConsultingFuture for MBOs looks bright

Future for MBOs looks bright

The levels of management buy-out in the UK is set for strong growth as sellers lower prices, according to a new survey by KPMG Corporate Finance.

The news comes in contrast to results from the fourth quarter in 2001 which saw the number of MBOs fall 54% to 22. Buy-outs fell 67% in value to Pounds 1.4bn. The last time quarterly volumes were this low was during 1995.

But future prospects look far better, particularly for private equity buyers wanting to acquire quality businesses with strong management teams.

Charles Milner, head of private equity at KPMG Corporate Finance, said: ‘We believe that 2002 looks more promising as vendor expectations move into closer alignment with prices private equity buyers are willing to pay. This will inevitably lead to more closures – it is simply a matter of timing.

‘The first few months of the year will be crucial in determining the extent of any recovery. A number of private equity buyers believe that 2002 will be an opportunity to acquire quality businesses at realistic prices.’

In all, a total of 124 transactions with a cumulative value of Pounds 18.9bn were completed in 2001. This compares with 158 deals worth Pounds 20.6bn in 2000 representing a fall of 22% in volume and 8% in value.

Milner added: ‘The normal flurry of activity at the year-end was noticeably absent for well-documented reasons including the global economic slowdown and particularly the tragic events and repercussions of 11 September.’

Links

MBO survey finds market has stalled

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