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Record year for the UK buy-out market in 200524/05/2006. Source: KPMG.
 KPMG found a 27 per cent increase in value to over £24bn invested in UK buy-outs, while the final quarter of last year showed over £5bn invested for the fifth quarter in a row.
The UK MBO market completed a record year with a strong final quarter of 2005. 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 £6.05 billion were completed in the UK in Q4 2005.
Commenting on the quarter, Mick McDonagh, corporate finance partner at KPMG's Private Equity Group said "The last quarter of 2005 was the fifth quarter in a row with over £5bn invested in the UK buyout market, a level of sustained activity that has not previously been experienced. There is no sign that this level of activity will let up in the New Year."
2005 in review
McDonagh said "In 2005 the market has been characterised by continued strong supply of capital to the private equity market. A large number of houses have had very successful fund raisings from institutional investors, but this firepower has been greatly enhanced by the liquidity of the debt markets. As a record year testifies, clearly private equity houses have found targets for their capital, with secondary buyouts (where private equity investors are both buyer and seller) and public-to-private transactions providing important sources of deal flow."
"2005 saw IPO markets remaining and a return to higher levels of corporate M&A activity. These conditions have helped underpin a healthy exit market which has helped bolster the reputation of private equity as an asset class which can produce strong return to investors. "
There were fourteen public to private transactions during the year at a total value of £7.362bn, representing over a quarter of market value in 2005. The average value of public-to-private deals at £526m was a record high. McDonagh noted "Public-to-private transactions continue to be an important source of deal opportunities at the larger end of the buy out market and the reality is that with more and more capital committed to private equity and the prospect of club deals, fewer and fewer companies on the stockmarket are now out of reach of private equity bids."
Prospects for 2006
McDonagh comments "The outlook for 2006 is positive with evidence of high levels of investment activity backed up by stable market conditions and the ongoing availability of funding. There is no reason to doubt that the current benign debt markets will continue, although lenders may well be more selective about the sectors they commit to."
"Competition for the best deals amongst private equity houses is intense, and this will be exacerbated as corporates increasingly provide competition and start to leverage the synergies they can bring to transactions. Increasingly, successful houses are being defined not just by their ability to spot good deals, but by their ability to either execute them off market or find the angles to win them in aggressive auctions."
2005 research highlights
The key points from the year's research include:
During 2005, 162 larger MBOs were completed worth a total of £24.91bn compared to 154 deals worth £19.61bn in 2004. This represents a 27% increase by value and 5% increase by number from 2004 to 2005.
Average deal size for 2005 is £154m compared with £127m the previous year.
There were five deals valued at over a billion pounds in 2005: Coral Eurobet (£2.18b), Warner Chilcott (£1.672bn), Somerfield (£1.203bn), HHG (£1.070bn), and Travelex (£1.055bn).
14 public to private (PTP) deals were completed in 2005, with a combined value of £7.362bn.
2005 Q4 research highlights
The key points from this quarter's research include:
In Q4 2005 there were 32 deals totaling £6.05bn compared to 46 deals worth £5.68bn for Q4 2004.
Average value of transactions in Q4 2005 was £189m compared to £123m for Q4 2004.
There were 4 deals above £250m in Q4 2005: Coral Eurobet (£2,180m), Somerfield (£1,203m), Fitness First (£800m), and Environmental Resource Management (£302m).
There was only one public-to-private (PTP) deal completed in Q4 2005 - Somerfield (£1,203m).
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