Study: European buyouts plunge 60%

The value of deals in the Continental European buyout market has hit a seven year low. Research for 2008 shows it is down 60% from the €108.2bn-worth of deals done in 2007, due largely to the scarcity of debt and disappearance of mega-deals.

Buyout deal value in Continental Europe plummeted 60 percent to an aggregated total of just €43.9 billion in 2008, compared to €108.2 billion for the previous year, according to research by the Centre for Management Buyout Research (CMBOR).

Deals at the higher end of the market have collapsed with “mega-deals”, defined as €500 million and above, making up just €16 billion of the market value in 2008 compared to €74.7 billion in 2007.

“The lack of debt is clearly taking its toll on the top end of the market with just 19 mega deals completed last year compared to 62 in 2007. This is likely to remain the norm as the year progresses and banks show limited appetite to fund large buyouts,” Christiian Marriott, director at Barclays Private Equity, said in a press statement.

Despite this gloomy overview the research highlights pockets of market resilience. The small-and mid-markets seem to be holding up, with deals in the €10 million to €25 million range reaching 92 in number and €1.6 billion in value, compared to an equivalent 97 deals worth an aggregated €1.8 billion in 2007. Mid-market deals valued at between €25 million to €50 million increased marginally in number from 66 in 2007 to 69 last year, and went up in value from €1.4 billion in 2007 to €1.8 billion in 2008.

However, the average deal size for the region has almost halved from €133 million in 2007 to an average of just €69.8 million in 2008.

France and Germany were the most active markets in Continental Europe, although both experienced significant declines. Last year French deal value reached €7.2 billion from 134 deals, which is a fall from €27.6 billion and 229 deals in 2007. Notable French deals in 2008 included AXA Private Equity's buyout of Altares Group, a French business to business information provider; AXA's buyout of Belgian investment group Gimv's majority stake food ingredients company Sfinc; and Duke Street's €217 million acquisition of French laboratory group Bionmis.

German deal numbers declined only slightly, however their values plunged from €26.4 billion from 135 deals in 2007 to less than half of this at €11.9 billion for 129 deals in 2008.

The research found that despite the steep decline in deal value, the aggregated worth of deals done in Continental Europe was still higher the UK’s, which was valued at just €25 billion for 575 deals last year. Looking at the whole European market, including the UK, deals only managed to reach €68.7 billion in 2008, which is less than half of the total €175 billion raised in 2007.

The proportion of deals made by family offices or private investors increased to 39.8 percent in 2008, which is an increase of more than 4 percent from 35.5 in the previous year. There were just 90 secondary buyouts in Continental Europe in 2008 valued at €12.9 billion, which is down from 150 transactions worth €46.4 billion the previous year.

“The situation we have witnessed in the second half of 2008 is likely to be repeated in 2009. Until confidence returns to the market most buyers and sellers will sit on their hands and wait for clear signals on any potential recovery,” Marriott said.