Drop In Average UK LBO Deal Size in Second Half of 2011

The UK leveraged buyout (LBO) market in 2011 saw deal volume return to figures similar to those seen in the pre-crisis boom-era, with 319 deals recorded during the year compared with 352 deals recorded in 2007. The aggregate value of UK-based LBOs increased slightly during 2011, hitting £14.36bn ($23.7bn) in comparison to the £14.3bn seen in 2010; however total deal values seen in recent years remain significantly lower than the 2007 peak, when LBOs in the country totalled £31bn ($61.6bn).

The first half of 2011 saw average LBO deal size in the UK increase progressively from £120mn ($194mn) in Q1 to £141mn ($227mn) in Q2 2011. During the second half of the year, however, the average UK LBO deal size dropped significantly, hitting a trough at £98.5mn ($154mn) in Q3 before returning to a marginally stronger figure in Q4 at £102mn ($160mn). Overall, the average LBO deal size for the entire year was £116mn ($182mn), representing the lowest level since 2009, when the average size stood at £83mn ($134mn).

During 2011 the largest private equity-backed transaction seen in the UK market was the £1bn ($1.6bn) leveraged buyout of motor services firm RAC, by the Carlyle Group, with the purchase being supported by a £620mn debt package. Other notable deals in the UK during the year included the £935mn ($1.448bn) buyout of The Priory Group by Advent International, and the £900mn ($1.445bn) take private of Northern Rock by lead investor Virgin Money and WL Ross & Co and Stanhope.