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UK buy-out activity holds steady in 2003

The UK buy-out market has held steady in 2003 and is set to match the level reached last year, according to preliminary year-end figures released by the Centre for Management Buy-out Research (CMBOR) and sponsored by Deloitte & Touche and Barclays Private Equity.

Management buy-outs worth a total of £14.5bn have been completed in the UK so far this year, compared with £15.3bn in 2002. With three weeks still to go until the end of the year, the statistics indicate that the market may finally have bottomed out.

But Tom Lamb, managing director of Barclays Private Equity, warns that the figures have been skewed by a handful of mega-deals including the £2.5bn buy-out of the Scottish & Newcastle pub estate and the £1.7bn take-private acquisition of retail chain Debenhams. Other major transactions to take place in 2003 include the £642m acquisition of cereal maker Weetabix by Hicks, Muse, Tate & Furst, and the $1.5bn joint buy-out of Inmarsat by Apax Partners and Permira.

‘Remove these transactions and we are left with a market which is still extremely fragile,’ Lamb said. ‘In fact, the overall market continues to be propped up by the mid-market, especially the 25m to £100m range which has actually grown by over 20 per cent this year.’

The report also found that public-to-private deals had been a prominent feature of the UK market this year. Take-private transactions have accounted for 26 per cent of deal value in 2003, compared to 18 per cent last year.

‘Public to privates characterised the buy-out market heyday so their comeback provides encouraging signs that deal conditions are improving,’ said Lamb. ‘However, much of the low hanging fruit has now been taken off the stock market so it is unlikely public to privates will ever match the 39 per cent share of the buy-out market achieved in 2000.’

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