European buy-out values doubled in 2010 and Q4 10 marked the highest value of buy-outs since the inception of the financial crisis.
The economic slowdown and the continued shortage of debt combined to produce probably the worst environment ever faced by private equity (PE).
Record European buy-out
The record European buy-out market value of €169.2b in 2007 now seems a distant memory but 2010 buy-out values are more than double 2009 figures and continue to grow. So is PE out of trouble?
At the height of the financial crisis, a number of commentators were forecasting the demise of the PE industry. It was assumed that PE-backed companies with high leverage levels would simply collapse under a burden of debt, exits would cease and businesses and returns would suffer.
However, according to the findings of Ernst & Young’s study of 2009 European exits — Beyond the bears: how do private equity investors create value? — only 2% of the overall portfolio saw ownership change from PE to creditors.
Buyouts by value (€ billions)
| Country | 2010 | 2009 | Record year value |
| UK | 21.2 | 5.4 | 63.8 (2007) |
| Germany | 4.5 | 1.9 | 26.6 (2007) |
| France | 7.7 | 1.9 | 33.8 (2006) |
Source: CMBOR/Ernst & Young/Barclays Private Equity 2010
Further, Centre for Management Buy Out Research (CMBOR)/Ernst & Young data for Q4 2010 confirms a positive change for PE. European buy-out values have doubled in 2010 and Q4 2010 marks the highest value of buy-outs since the inception of the financial crisis. The long term catastrophe predicted has been thwarted and confidence has returned to the market.
Increased value in PE deals exhibits confidence
Renewed confidence is seen in the increasing value of PE deals completed in 2010. By Q4, the value of European buy-outs totalled €48.2b with a fourth quarter value of €14.7b — the highest since 2008, and up markedly on 2009, which saw only €18.2b of deals completed.
European exit numbers have also improved steadily from 227 in 2009 to 276 in 2010 — providing another signal that PE exit routes are opening up and the worst of the downturn may be behind us. 2010 total exit value of €55.7b is larger than total market entry value — IPOs at €21.6b set a new record, secondary buy-outs accounted for €18.8b and trade sales were at €14.5b.
Certainly not a new phenomenon, secondary buyouts re-emerged in 2010 as an attractive source of exits, with 102 secondary deals completed, more than double 2009's total of 49. Interestingly, 2010 secondary buy-out activity is at levels similar to those seen in both 2004 and 2005.
Buyouts by volume
| Country | 2010 | 2009 | % change |
| UK | 171 | 122 | 40 |
| Germany | 52 | 54 | (3.7) |
| France | 101 | 76 | 32 |
Source: CMBOR/Ernst & Young/Barclays Private Equity 2010
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