UK Buyout Aggregate Deal Value Dips

by Jessica Hull

  • 26 Apr 2012
  • PE


Recent reports show that the UK economy is technically in a double-dip recession, due to the two previous consecutive quarters showing a contraction in economic output. This, coupled with the prevailing sovereign debt crisis in the neighbouring Eurozone, suggests that investors are likely to remain cautious. This has been reflected in the dip in the aggregate value of private-equity backed buyout deals in the second half of 2011 and the first quarter in 2012 from the previous high in Q2 2011.

Last year’s average aggregate quarterly value of buyout deals in the UK was $5.9bn. In Q4 2011 and Q1 2012  the quarterly totals stood at $5.1bn and $5.5bn respectively. This drop in aggregate value is not a consequence of the fall in the number of deals, as this has remained relatively constant in the range of four deals over the last four quarters. The decrease in aggregate deal value has been a result of fund managers making a similar number of investments, but in a lower value band. In the last two quarters, over 85% of deals in the UK have been under the small-cap deal bracket, which are those valued at less than $250million.  In this same time frame, mid-cap deals ($250 - $999million) and large-cap deals (larger than $1billion) have accounted for 10% and 4% of the number of buyouts in the UK, respectively.

So far in Q2 2012 (up to 26/04/2012), there have been 23 PE-backed buyout deals valued at $0.8billion. A quarter of the way into Q2 2012, the number of deals seems to be in line with the average from last year, but the aggregate deal value does not show any signs of recovery. With the continuing uncertainty in the Eurozone, coupled with lower than expected economic indicators, the aggregate value of deals in the UK is likely to remain at a subdued level.

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