Latest figures from the Centre for Management Buy-out Research, founded by Deloitte and Barclays Private Equity, have shown that deals in the £100 – £500 million range, have finally bowed to the credit crunch and dropped to £3bn in 2008, compared with £7bn in H1 2007.  The total size of the market in H1 08 is £11bn; the lowest first six months since 2004.

Mark Pacitti, corporate finance partner at Deloitte, commented: “While deals at the top end of the market were hit hard last year, the ‘mid market’ range had proved more resilient.  However, the latest figures show that the private equity market is now feeling the credit crunch much more comprehensively and has hit a four year low overall.  There has been a widespread assumption that trade buyers would make the most of private equity houses struggling to access debt and step into the breach.  In fact trade buyers are nowhere to be seen and of the 14 exits over £100m this year, only two or three could be classified as being sold to trade.”

Tom Lamb, Co-Head of Barclays Private Equity, commented: “The types of deals which have made it past the finishing line in the last few months have tended to be defensive plays.  Deals such as Biffa at £1.2bn, in the waste sector, and Abbot at £0.9bn, an energy business, are good examples of the type of deals getting done.  By contrast, the total value of retail deals has fallen dramatically.  It is no surprise that potential acquirers will want to see how the economy plays out over the coming year before committing to a deal.”

The top four deals completed in the first half of 2008 were Emap at £2bn, Biffa at £1.3bn, Abbot Group at, £0.9bn and Northgate Information Solutions at £0.5bn: all public to private deals.

Mark Pacitti added: “We are seeing a stalemate situation where private vendors are unwilling to budge on price and acquirers are holding out for a bargain; mirroring problems seen in the housing market.  At the same time, we have seen public to private deals hold up, making up 48% of the market value.  The top four deals this year are all delistings from the public market.  With private vendors unwilling to discount, it is likely that we will see more private equity firms circling public companies.”

Tom Lamb went on to say: “While the mid-market houses may have found it easier to source debt than the larger players, they are finding it increasingly difficult to find attractive UK deals. Good mid-sized businesses with strong management teams are still bankable, but in general fewer businesses are being put up for sale.    With large coffers of uninvested capital, certainly running into the billions of pounds, and a predicted quiet summer, private equity houses solely focussed on the UK are unlikely to deploy much of their investors’ capital in coming months.”

Key facts:

• The value of the buy-out market has dropped from £24.5bn, recorded in the first half (H1) of 2007, to £11bn in the first half of 2008;
• An increased volume of family divestments in March shows the knock-on effect of the implementation of CGT changes but the numbers do not equate to a significant uplift in the overall value of that market;
• Mid-market deals in the £100m - £500m range dropped from £7bn, in H1 2007, compared with £3bn in H1 2008;
• A reversal of fortunes has been seen in the retail, leisure and property & construction sectors with drops of £12.5bn to £0.4bn, £1bn to £0.2bn and £1.8bn to £0.3bn in the respective sectors compared with the first half of 2007;
• Business services has seen the largest increase of the industry groups with a jump from £2.4bn to £3.6bn compared with the same period in 2007.

Notes to Editors:
The Centre for Management Buy-out Research (CMBOR) was founded by Barclays Private Equity and Deloitte at Nottingham University Business School in 1986.  CMBOR is world-renowned as the long-standing leader in providing robust independent analysis of the buy-out and private equity market.

Mark Pacitti, Deloitte            020 7303 5871/ 07768 574 631
Tom Lamb, Barclays Private Equity         020 7653 5300 / 07770 613 447
Christiian Marriott, Barclays Private Equity      020 7653 5306 / 07977 468 826
Sorrelle Cooper, Deloitte           020 7303 6359 / 07932 078218
Christopher Dean, Lawson Dodd  020 7535 1355 / 07865 083029

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