UK Private Equity Activity 2006 – 2011

by Jonathan Parker

  • 04 Jul 2011
  • PE

Our data shows that although the number of buyout deals involving UK-based portfolio companies has recovered somewhat since the financial crisis, the aggregate value of such transactions is yet to reach its pre-crisis levels. In Q2 2007, when UK-based deal-flow was at its peak, private equity buyout firms invested £12.6bn in UK firms. Following the onset of the financial crisis, this declined to a low point of less than £1bn in early 2009. UK-based deal flow then rebounded from that low point, and in Q3 2010 saw a total of £5.6bn in aggregate value of deals. Although this represented the highest level in the post-Lehman era, it was still some way off the pre-crisis peak. This trend is also reflected in the quarterly aggregate value of deals, with a post-Lehman average of less than half the pre-crisis average.

Since UK deal-flow hit its low point in Q1 2009, it has been rising continuously, with the exception of two quarters in 2010. The number of buyout deals tells a similar story, falling to a low of 22 that same quarter. However, there has been an average of 54 buyout deals per quarter since the crisis, compared to 79 deals per quarter before Q3 2008, suggesting the volume of deals has recovered more so than the aggregate value of deals. Although the volume of deals has not yet reached its previous levels, a post-crisis peak of 92 deals in Q2 2010 is not far from the pre-crisis peak of 104 in Q2 2007. As we approach the end of Q2 2011, there have currently been 71 deals announced in the UK, valued at over £3.7bn, more than 10 times the activity witnessed during the low point in early-2009. This indicates that, as could be expected, the average value per deal has fallen somewhat since the crisis and remained depressed.

In the pre-crisis period, the highest UK deal volume and aggregate value occurred in Q2 2007, which represented the boom period of private equity transactions. This peak in deal value was partly due to the acquisition of music company EMI by Terra Firma, a £4.2bn deal. The post-crisis peak in aggregate value of deals, recorded in Q3 2010, was also largely due to one deal, namely the acquisition of Tomkins, a UK-based engineering and manufacturing group, by Onex Corporation and the Canada Pension Plan Investment Board. This deal was valued at £3.15bn. More recently, the Carlyle Group has announced the acquisition of RAC, a UK-based roadside assistance provider, from Aviva, for £1bn. The deal is expected to be completed in the third quarter of 2011.

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