Booming Private Equity Buyout Levels in the UK


March 3, 2017

The start of the year has witnessed record levels of private equity buyouts of UK companies. The deal value and number suggest investors are opting for putting their money work, even though the markets might face turmoil in the coming months.


Record level deal numbers


In the first two months of the year, 30 global private equity buyouts have been recorded. The deal value of these deals has been £5.6 billion, which is over £2 billion more than last year this time. This is around 73.3% year-on-year increase in deal value, according to Mergermarket’s data.


The buoyant mood has been driven by strong deal activity in the UK. The same data shows, the average value of private equity deals in the UK have gone up from £254 million last year to current £372 million. Industry assets have also seen a rise in the last few months. According to Preqin, the assets rose close to $2.5 trillion in the middle of last year.


A number of big deals that have helped drive up the activity and deal value. Blackstone’s acquisition of Aon and its benefits outsourcing division is one such deal to boost the numbers. The deal was announced in January and it was worth £3.4 billion.


In the UK, deals have kept coming. Sportech has just struck a deal with FP Acquisitions Limited, which is a company controlled by the funds advised by European private equity investors OpCapita LLP. The London-listed company was sold for a total cash consideration of £83 million.


Data analysts predict a strong year


The outlook looks rather secure in terms of future deal activity. This is down to the current dry powder levels. According to Preqin reports, the global levels of available capital for investments rose by 16% in the six months leading up to June 2016. In an interview for the City A.M., Katharine Dennys, research editor EMEA at Mergermarket, said, “an estimated $800bn-worth of dry powder will sustain activity within the private equity space, keeping prices at a high level throughout 2017”.


DealMarket reported last week on Preqin’s investor report, which outlines a strong interest in private equity among all the other alternative asset classes. A large number of investors remain interested in the asset class and are planning to invest more in 2017.


Even the uncertainty of the future political climate is not enough to stall investor mood. The risk-on attitude has indeed provided plenty of space for private equity deal volume to grow. For investors sitting on dry powder could actually increase the opportunity cost.


Dennys told City A.M., “For private equity practitioner, the cost of inactivity is far greater than the risks they are facing. As a result, dealmakers will find a way to navigate the political uncertainty in order to deploy their considerable funds.”


Private equity executives feel more confident, especially in the US. President Trump’s Administration might push through legislation to easy taxation and reduce financial regulations. On the other hand, the market might jitter in the coming months in Europe with elections in France and Italy.

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