The mega private equity deal is back in the UK, according to the latest management buyout (MBO) research from KPMG. While the number of deals completed so far this year – at 65 – trails the 72 completed in the first half of 2010, there have been two deals at the £1bn mark.
Michael McDonagh, private equity partner at KPMG, commented: “While we have seen a third less deals in the last quarter compared with the year before (24 for Q2 2011 versus 36 for Q2 2010), the average deal size is up 55% at £155m (compared with £101m for Q2 2010). Today’s story is quite different to that of last year when we saw a high volume of mid market transactions driving private equity activity in the UK. This year, we’ve seen the volume turned down but those who are striking deals being braver and securing much bigger values.
“We have seen many private equity deals, particularly and perhaps unsurprisingly in the retail sector, fall away this year as negative economic factors take the shine off the sales process. However, the RAC and Priory deals were bright billion pound spots in an otherwise fragile environment. Indeed mid market fragility has seen the number of deals almost half in the past few months compared with the first quarter of the year.”
Commenting on prospects for private equity activity for the rest of the year and into 2012, McDonagh added: “While the negative economic indicators cannot be ignored and will undoubtedly put many vendors and acquirers off, the billion pound deals show that the debt markets are open again for private equity houses with big ambitions. Indeed the pan European market is looking buoyant with a third billion ‘big ticket’ deal announced in June (EQT/Securitas). Attractive leverage packages, buttressed by a strong high yield market, suggest we could see more ‘mega’ deal activity in the UK and across Europe, following the US market where large deals have been growing in number since 2010.”
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