Europe’s Large-Cap LBOs 2011 YTD

by Kevin Smith

  • 01 Dec 2011
  • PE

As Europe continues to grapple with poor domestic growth, rising sovereign debt levels and political discordance, it is small wonder that private equity fund managers appear cautious towards committing to large leveraged buyout deals (LBOs). 

Large-cap LBOs - defined as deals that are valued over $1bn in size - decreased 48% in aggregate value in Q3 2011 over the previous quarter, as credit markets tighten and banks continue to struggle to lend capital to support such transactions.

Currently, just three deals over the $1bn mark have been announced in Q4 2011, accounting for an aggregate $4.1bn, some 24% lower than the comparative figures recorded for Q4 2010. The three deals that make up this quarter’s aggregate figure include the $1.5bn buyout of France-based technology company Genesys by Permira; the $1.44bn take private of Northern Rock by WL Ross & Co, Virgin Money and Stanhope; and finally the recently announced $1.12bn buyout of Capital Safety Group by private equity giant KKR.

Only 22% of all large-cap LBOs made by private equity firms between 2006 and 2008 have held full successful exits, with 3% of these larger buyouts being written off fund managers’ books completely. Only time will tell if these larger investments made during the boom-era have been able to weather the previous recession and the current economic turmoil that has engulfed the region.

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