Mid-market, growth capital deals join slump

The decline in European buyouts has spread fully across all deal sizes as deal volume in the formerly resilient lower mid-market, defined as deals less than €160 million ($250 million), fell by 43 percent on the fourth quarter to €4.7 billion, and the number of deals fell by 37 percent to 109, according to Candover, the European buyout firm. The lower mid-market had continued to perform strongly in the second half of last year, as the firms’ deals depend less on leverage than their larger peers.

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The number of private equity-backed acquisitions fell to 137, the lowest quarterly total since 2004 and a 33 percent drop on the fourth quarter of 2007, while deal volume also fell 32 percent to €19 billion.

Growth capital was also affected, with the value of deals falling 57 percent to around €1.2 billion, across 102 deals, a decline of nearly 28 percent.

There was only one buyout above €1.65 billion which closed for the second consecutive quarter, Montagu Private Equity and Global Infrastructure Partners’ €3 billion de-listing of Biffa, the waste disposal business.

There were two other deals of more than €1 billion: Macquarie’s €1.5 billion buyout of Techem, the German energy and resources metering company; and Apax Partners and Guardian Media Group’s €1.36 billion buyout of Emap’s business to business publishing division.

The value of mid-market deals classified as between €160 million to €1.65 billion also declined by 37.5 percent to €11.3 billion, although the number of deals only fell by four to 27.

The one sector to remain isolated from the downturn was early stage investment where deal volume was up 6.5 percent to €459 million and the number of deals remained the same on 83.

Regionally deal volume fell in the Benelux by 84 percent to €615 million and in Germany by 43 percent to €3.75 billion. French deal volume also fell by 37 percent to €2.4 billion. UK deal volume fell by 7 percent to €9.27 billion. But Candover attributed this relatively strong result, in part to a flurry of deals driven by sellers in an effort to secure the UK 10 percent capital gains tax discount, which increased to 18 percent in this month’s UK budget.