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UK MBO market kicks off 2005 on a strong note

The UK buyout market put in a strong performance in the first quarter of 2005, up 28 percent from the same quarter the year before. According to figures released by KPMG’s Private Equity Group (which tracks UK buyouts with value over £10 million) transactions with a total value of £4.78 billion were completed in the UK in Q1 2005. This represents 35 deals at an average value of £137m.

Commenting on the quarter, Charles Milner, Head of Corporate Finance at KPMG’s Private Equity Group said “After the upturn in 2004, the market has now plateaued out at a healthy level of activity. This solid performance has been supported by a generally benign economic outlook and a liquid, well-priced debt market. It is still very much a sellers’ market with considerable competition for the best deals.”

“There is no reason why this active market shouldn’t continue throughout the summer, particularly if the cost of debt and the multiples currently available are maintained. Activity levels in the MBO market are just as much about confidence within the banking sector as it is about the attitudes of the private equity houses themselves.”

The four largest deals of the quarter were all public-to-private transactions. These were Warner Chilcott (£1,672m), Big Food Group (BFG) (£594m), National Home Properties (NHP) (£564m) and Countryside Properties (£354m) with a combined total of £3.18bn There were also six secondary transactions, where the vendor is also a private equity house, accounting for 20 percent of the quarter’s value.

Milner adds “Secondary buy-outs continue to feature significantly in completions. This will continue so long as the debt markets remain as robust as they are at the moment. However, this secondary buyout activity should not mask the fact that an average of over £3 billion has been invested in primary leverage buy-outs in each quarter of the last year.”

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<KPMG’s Private Equity Group brings together our most experienced private equity practitioners from across the firm to devote their full attention to meeting the needs of the private equity community. The Private Equity Group gives support throughout all stages of the private equity life cycle, combining in-depth knowledge and understanding of the private equity market with financial, commercial and operational skills in order to address the issues that matter to the private equity community.