Significant growth in European private equity market in Q3 2010 (EU)

Preliminary figures released yesterday (October 25, 2010) in the Q3 2010 unquote" Private Equity Barometer (published by unquote" and sponsored by Candover, a European private equity house) reveal significant growth in European private equity market as larger buyouts return €23.9 bln. of private equity deals.

European private equity
The total value of European private equity-backed transactions reached €23.9 bln. in Q3 2010, close to the total value amassed in the entire first half of the year and the highest quarterly value figure recorded since the second quarter of 2008. This latest quarterly value is more than 80% of the total value of all deals recorded in 2009.

Despite the significant rise in value, deal volumes actually fell to their lowest level in more than a year with just 234 transactions during the quarter following a decline of mid-market and smaller transactions across the continent.

The total value of buyouts reached €21.4 bln. in Q3, almost double the €11.3 bln. recorded in Q2 and by far the highest figure since the €21.6 bln. witnessed in the second quarter of 2008.

The significant increase in value was driven by a return to the market of large buyouts. In total, there were six transactions valued in excess of €1 bln. equaling the combined total over the last 18 months. Despite the rise in the value of buyouts, volumes fell during the quarter from 97 to 89.

The mid market, which was driving the market in the first half of the year, saw an 18% fall in deal value to €7.1 bln. and a 15% fall in volumes to 28 transactions compared to Q2

The take private of UK based Tomkins was the largest buyout recorded during the quarter at €3.51 bln., followed by the €2.56 bln. buyout of Sunrise Communications in Switzerland and the €2.50 bln. buyout of RBS WorldPay in the UK. Other notable UK based transactions included the €1.2 bln. buyout of AutobarGroup, the €451 mln. buyout of Stonegate Pub Company and the €350 mln. buyout of Equity Trust.

The UK remained the largest market by value of buyouts and accounted for 44% of all deals during the quarter. Three of the largest UK deals were valued at over a €1 bln. each pushing the total value of buyouts in the UK to €9.4 bln., more than double the previous quarter. Like the rest of the continent however, the volume of deals in the UK fell, from 40 in Q2 to 26 in Q3.

Commenting on the latest figures, John Arney, Managing Partner of Candover Partners, said: "It is encouraging that in addition to the more predictable larger secondary buyouts, Q3 witnessed the completion of some large primary deals, suggesting that sellers are out there and lenders' confidence continues to grow. What concerns me though is the fall off in the mid-market and it is difficult to see what's behind this.

"It's unlikely that there is a lack of sellers, and debt finance should be available, so is it the faltering confidence in the economy that's choking mid market volumes? Q4 should provide an important barometer to determine the cause. Will it reveal that Q3 was simply a blip or alternatively that European private equity is still bumping along the bottom of its cycle? Let's see."

Source: Tulchan Communications

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