Cooling market for MBOs in UK


Last year was a record within the UK for management buy-outs, but 2006 is looking distinctly cooler, according to new figures.

The statistics from consultancy KPMG's private equity group showed that almost £25bn worth of deals were completed in 2005.

But the prospects for this year are less good, with the number of MBOs during first three months of 2006 at their lowest levels for more than two and a half years.

The group, which tracks UK buy-outs with a value exceeding £10m, calculated that some 162 larger buy-outs, worth a collective £24.9bn, were completed during 2005.

This was a 27 per cent increase, by value, on the 154 deals (worth £19.6bn) completed in 2004.

But for the first three months of 2006, 31 transactions, with a total value of £2.9bn, were completed, compared with 37 deals worth £5.36bn in the same period last year.

Mick McDonagh, corporate finance partner at KPMG's Private Equity Group, said: "After a record year in 2005, when £25bn went into buyouts, 2006 has got off to a stuttering start - not because of a shortage of capital, but a shortage of quality deals."

One of the reasons why 2005 was such a good year for MBOs was that private equity groups had record amounts of equity to invest after successful fundraising from institutional investors over the last two years, said KPMG. McDonagh said: "There are very few companies out there which are beyond the reach of private equity because they can club together and do some very large transactions." The previous strongest year was 2000, with around £20.6bn of deals.

Public-to-private deals were also growing in number and value, with 14 such transactions taking place in 2005, valued at £7.4bn in total, said KPMG.