Multiple: European buyouts watch January 2013

For the European buyout market, 2012 proved to be one of the toughest. With a combined deal value of €51.4b, the 563 deals completed during 2012 represent a significant slowdown on 2011.

"Businesses are choosing to sit and wait for conditions to improve before seeking deals. The cycle has broken down. Only by adapting their sales processes, looking further afield will PE houses find the right buyers and restart the deal cycle."- Sachin Date, EMEIA Private Equity Leader at Ernst & Young, UK

European buyouts

Caution and conservatism pervades the marketplace. And no more so than in the major economies of the Eurozone, where political and fiscal uncertainty has driven down activity.

Deal activity at a glance

The following key points are based on research recorded by CMBOR.

• Exit value exceeds deal value
  The 322 exits in 2012 returned €53.3b to investors, €1.9b more than what was invested in the buyout market during the year. While this will help fundraising in the future, fears persist that a number of portfolio companies remain stuck, creating greater demand for financial restructuring.
• 2012 a fifth lower than 2011
  Weak activity in Q4 compounded a difficult year for the European buyout market in 2012. With 563 deals valued at €51.4b, the market finished a fifth lower by value and 10% lower by volume than 2011.
• France and Germany slow in 2012
  Deal value and volumes in France fell significantly from the last quarter. This drop confirms that the pick-up in Q3 was a reaction to tax increases and not the start of sustained growth. In Germany, the slowdown was not so dramatic, but nevertheless value fell some 20% to €7.1b, putting it ahead of France.
• UK props up European market
  With an overall deal value of €19.7b (38% of the overall value of transactions in Europe) and 35% of the total number of buyouts, UK transactions led the way in 2012. This contrasts with 2011, when the value of UK buyouts (€14.6b) fell behind those in France (€15b), which led the market.
• Mid-market deal flow declines
  The number of transactions valued between €100m and €1b fell 30% between 2011 and 2012 — 81 compared with the previous year's 112. However, the 13 deals valued at more than €1b (there were 12 in 2011) show that the mega deal market is holding up well. This is indicative of a flight to quality and stability.

Pipeline prospects: Future deal activity

There are several deals around the European market moving toward completion that will help boost the market in the early stages of 2013, alongside a number of other potential transactions still in negotiations.

Contributing to the pipeline is CVC Capital Partners, who has agreed to buy Cerved Group, a corporate intelligence and rating agency based in Milan, Italy, in a deal value of around €1.13b. In the Netherlands, Blackstone has agreed to acquire trust administration company Intertrust from Waterland PE Investments in a secondary buyout that is valued at €675m.

Although the timing is unclear, momentum is building and this should lead to increased confidence and a stronger market. When these deals complete, 2013 will get off to a good start.

European buyouts

Source: CMBOR; Equistone Partners Europe; Ernst & Young.

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