Europe sees comeback of large private equity buy-outs
- Average deal value almost double full 2009 levels in first three quarters of 2010
- Large secondary buy-outs return in 2010
- UK and France lead activity across Europe
LONDON, 29 OCTOBER 2010 — The third quarter of 2010 saw a comeback of large private equity buy-out deals, with average deal size double those of 2009 and total deal value at €30.5b in the first nine months of this year, compared to €18.2bn for the whole of last year, according to The Centre for Management Buy-out Research (CMBOR), which is sponsored by Ernst & Young and Barclays Private Equity.
The data, compiled by CMBOR and covering private equity buy-out activity across 15 European countries*, also show that secondary buy-outs contributed nearly half (49%) of market value in the first three quarters, compared to just one fifth last year.
So far this year, the European buy-out market has seen 371 deals with a combined value of some €30.5b. While Q3 (€9.4b) saw deal value holding steady compared to Q2 (€9.6b), the total value of deals over €1b has reached €9.2bn this year compared to only €2.8b in 2009. Buy-outs in the €500m-€1bn range have tripled to nine this year with a total value of €6.2b.
Sachin Date, transaction advisory services markets leader for Europe, Middle East, India and Africa, says,
"There is some way to go to reach the highs seen in previous years, but the indications are that the market’s recovery is relatively robust, with some multi-billion euro completions expected in the reminder of 2010."
Secondary buy-out value hits record high
The secondary buy-out market is strengthening with 84 such deals notched up in the first three quarters of 2010, outnumbering the 49 deals made during the whole of 2009. Secondary buy-outs contributed just 11% of market volume last year but these deals have doubled to 23% in 2010. In terms of market value, they contributed one fifth in 2009 year, but account for a record 49% so far this year.
In the second quarter of 2010 EBIT multiples were rising, especially in deals of more than €100m. This trend continued in the third quarter, with an average multiple of 19.7x, giving a year-to-date average of 17.2x for 2010. In 2009, the multiple at Q3 stood at 10.5. Also increasing is the Debt/EBIT ratio which rose in the third quarter bringing the year to date average to 9.8x.
Exit volume is also on the rise, with the number of exit deals in 2010 so far set to overtake 2009 levels. By value, 2010 has already surpassed 2009 levels.
Sachin Date comments: “It is interesting to see that compared to 2009, the overall value of exits has more than tripled in the first nine months of 2010 to €39b bringing the average deal size to €184m”.
UK and France lead the way
The UK and France lead the way among the countries examined, with a combined deal value of €18.4bn so far this year representing more than 60% of the total.
The UK remained the largest buy-out market in Europe in 2010 and its value has risen sharply to €14.7b. Last year the UK remained by far the largest country by volume, although the number of buy-outs fell sharply to 122. The number of UK buy-outs remain low this year by historical standards, with 130 deals recorded.
Deal value in France has already doubled in 2010, rising to €4.0b from only €1.9b last year after reaching a high of €33.8b in 2006. The number of buy-outs in the French market also fell to 76 in 2009 from a record 207 in 2007. So far this year France has already had 72 buy-outs.
Christiian Marriott, Director at Barclays Private Equity commented:
“Confidence appears to be returning to the European buyout market. In general terms, it is encouraging to see that banks are more willing to lend for investment in the right assets and equity sponsors have greater future earnings visibility of prospective investee companies. There also remains a significant amount of capital to be put to work by European private equity houses which is promising for healthy deal flow for the rest of the year.”
Manufacturing remains largest sector
Manufacturing continues to be the largest sector for buy-outs by deal number and deal value, representing 29% of the market. In the first three quarters of 2010 107 deals have been done with a value of €6.4b, already surpassing the sector total of 106 deals for 2009.
At about half the level of manufacturing, business services (54) and technology, media and telecoms (53) were the second and third most active sectors by number of deals for the year so far.
Date concludes, “2010 is set to end on a high with European buy-out values to Q3 stronger than the whole of 2009 and larger deals on the rise with €9.2b already invested in mega buy-outs this year compared to only €2.8b in 2009.”
*The 15 countries include in the research are: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the UK.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 141,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
Ernst & Young expands its services and resources in accordance with clients’ needs throughout the CIS. 3,500 professionals work at 16 offices in Moscow, St. Petersburg, Novosibirsk, Ekaterinburg, Togliatti, Yuzhno-Sakhalinsk, Almaty, Astana, Atyrau, Baku, Kyiv, Donetsk, Tashkent, Tbilisi, Yerevan, and Minsk.
For more information about our organization, please visit www.ey.com.
About Ernst & Young’s Transaction Advisory Services
How organizations manage their capital agenda today will define their competitive position tomorrow. We work with our clients to help them make better and more informed decisions about how they strategically manage capital and transactions in a changing world. Whether you’re preserving, optimizing, raising or investing capital, Ernst & Young’s
Transaction Advisory Services bring together a unique combination of skills, insight and experience to deliver tailored advice attuned to your needs helping you drive competitive advantage and increased shareholder returns through improved decision making across all aspects of your capital agenda.
The Centre for Management Buy-out Research (CMBOR) was founded at Nottingham University Business School in 1986. CMBOR is world-renowned as the long-standing leader in providing robust analysis of the buy-out market. CMBOR data covers all buy-out activity and therefore includes transactions funded on a cash or debt-only basis as well as traditional private equity-funded buy-outs. CMBOR is independently sponsored by Barclays Private Equity and Ernst & Young.
About Barclays Private Equity
Barclays Private Equity is one of Europe’s leading investors in mid-market buy-outs with a successful track record spanning over 25 years. It has a team of over 40 investment professionals in seven offices across five countries. Its offices are in Birmingham, London, Manchester; Paris; Munich; Milan and Zurich. Its investment in individual transactions ranges between €10m and €200m although it is able to underwrite much larger equity investments up to €300m which would be shared with co-investors. In the UK, it has a sector focus on Consumer & Travel, Financial Services, Support Services and Specialist Engineering.