The UK private equity market dropped to its lowest level for over 13 years in the fourth quarter of 2008, according to a study by the Centre for Management Buy-out Research, sponsored by Barclays Private Equity. The value of buy-outs reached just 994 million in Q4 2008, down massively from the 5.7 billion in Q4 2007 and the 5.6 billion in Q3 2008.Deals across all value ranges saw significant decreases in the latest quarter. In the sub-10 million bracket, deals have fallen by 41% on quarter three, while deals in the 10-100 million range fell by 59%. The largest drop was in the 100-500 million range, which witnessed a fall of 78% on quarter three.
The 2008 total now stands at 19.1 billion from 549 deals, down over 58% on 2007’s record figure of 45.9 billionn and 671 deals.
“Last year started off in good shape with the strongest quarter one on record,” says Christiian Marriott, director at Barclays Private Equity. “Subsequent quarters however all witnessed marked falls in buy-out activity as the market squeeze has tightened. To set today’s figures in context, the size of the market in quarter four 2008 is not considerably higher than the largest European buy-out fund raised in 1995 ($700 million).
“Analysis of deals by sector, while broadly reflecting the downturn, also reveals some interesting trends. Deals in the business and support services sector have increased to 33.4% of total value, up from 16 per cent in 2007, reflecting investors’ desire for opportunities in resilient sectors. The retail sector, on the other hand, has experienced a huge drop in its share of buy-out activity from 31.2% of value in 2007 to just 3.2% last year. This is a consequence of issues in the wider economy and concerns about the buoyancy of consumer spending on the high street.
“Where the market goes from here is anyone’s guess. If senior lenders return to the buy-out market and business sentiment begins to improve, buy-out activity should increase in first half of 2009, but there is still a lot of uncertainty out there.”
D.C.