BusinessCorporate FinanceMBO activity slumps to seven-year low

MBO activity slumps to seven-year low

Management buyouts have hit their lowest level since 1996, and experts are divided about the chances of a revival in 2003.

Buyout deals in 2002 fell to £14.6bn from £19.1bn last year, concluded both KPMG and the Centre for Management Buy-Out Research in their respective research reports.

‘While the private equity market place is currently seeing a pick-up in activity, the question remains as to how much will convert. Prevailing views range from the downright pessimistic to those who are quietly confident.

We are in the latter camp,’ said Charles Milner, head of corporate finance in KPMG’s private equity group.

The average level of buyout activity throughout 2002 was flat, with 28% of the year’s value coming from two top deals. Private equity deals accounted for nearly half of the year’s activity.

‘Owners of businesses are finally starting to get more realistic in their price expectations and corporate finance advisers are reporting increasing numbers of good quality deals in the pipeline,’ said Tom Lamb, managing director of Barclays Private Equity UK.

Mark Pacitti of Deloitte & Touche Corporate Finance argued the stock market collapse widened the gap between small cap and the FTSE-350 indices, which encourages shrewd financial players to spot investment opportunities.

‘At the same time, small quoted companies are growing increasingly frustrated by poor stock market valuations. The climate is perfect for public-to-private activity to accelerate further,’ Pacitti said.

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