Some 674 private equity-backed buyouts deals worth an aggregate USD60.6bn were announced in Q3 2011, a 23% decrease in value from the previous quarter’s total of USD78.7bn, according to Preqin’s quarterly deals data. A total of 254 exits valued at an aggregate USD56.2bn were announced in Q3 2011, 54% down from the record total of over USD120bn in Q2 2011.
In Q3 2011, 670 private equity-backed buyout deals with an aggregate value of USD60.6bn were announced, a 23% decrease in value compared to Q2 2011. However, aggregate deal value in Q3 2011 is 7% larger than in Q1 2011, when 659 deals were announced with a combined value of USD56.8bn, and surpasses the average 2010 quarterly figure of USD54.5bn.
254 exits valued at an aggregate USD56.2bn were announced in the quarter, a significant 54% decrease in value from Q2 2011, when a record high of over USD120bn in aggregate exit value was achieved. This decrease has been primarily due to a marked absence of exits valued at over USD1bn, with only 12 exits in this size range during Q3 2011, and no exits valued at over USD5bn, while the previous quarter saw 21 exits at over USD1bn and three exits at over USD5bn.
The largest buyout deal of Q3 2011 was the announced USD6.3bn acquisition of Kinetic Concepts by a consortium comprising Apax Partners, CPP Investment Board and Public Sector Pension Investment Board in July 2011. This deal is the largest buyout in the post-Lehman era, and was announced before the recent wave of market uncertainty.
Of the 10 largest deals in Q3 2011, seven were announced in July, with only one of the 10 largest buyouts coming in September. An aggregate USD30bn in deal value was announced in July 2011, slowing to just over USD12bn in September.
There were 365 buyouts in North America during the quarter, accounting for USD29.9bn in aggregate deal value, 49% of the global total. However, the aggregate value of North American deals is down 24% from the previous quarter.
Only USD2.2bn in North American deal value was announced in September 2011, down sharply from the USD17.8bn announced in the first month of the quarter.
European buyouts totaled USD22.8bn in value in Q3 2011, a 30% decrease from the 246 deals worth USD32.3bn in Q2 2011.
Asia and Rest of World witnessed an 11% increase in aggregate deal value in Q3 2011, with USD8bn announced, up from USD7.2bn in Q2 2011.
LBOs accounted for 43% of all deals and 52% of aggregate deal value in Q3 2011. Add-on deals made up 37% of all deals, a significant increase from the buyout boom era when add-ons typically represented around a fifth of all deals.
The most prominent industry for buyouts in Q3 2011 by number of deals was the industrials sector, with almost a third of all deals taking place in that sector. Business services and IT represent the largest sectors by value, with 21% and 20% shares respectively.
During Q3 2011, 87 secondary buyouts were announced with a value of USD16.6bn, representing a decrease of 33% in value from the previous quarter, when 101 secondary buyouts valued at a total of USD25bn occurred.
“In Q3 2011, we have witnessed a decline in the value of private equity-backed buyouts and exits, down 23% and 54% respectively from the previous quarter," says Manuel Carvalho (pictured), Manager, Private Equity Deals. "In particular, the latter part of the quarter has seen a notable slowdown in large-cap deal flow, with uncertainty and tightening debt markets leading to an absence of deals and exits valued at over USD1bn. In response to this, the small-cap buyout sector has taken an increasingly prominent position, with deals valued at less than USD250mn representing almost three-quarters of the number of deals announced during the quarter.
"While there has been a significant decline in deal flow, it is important to note that overall buyout activity in Q3 2011 remains up 7% from Q1 2011, and surpasses the average 2010 figure of USD54.5bn per quarter, while exit activity is at the levels witnessed in mid2010, and well above the levels seen in late 2008 and 2009. As the re-emergence of turbulent market conditions has led to tightened credit conditions and a rising cost of capital, it is likely that this will result in the continuing absence of large-cap deal flow, leading buyout shops to focus their attention on small and mid-market deals until market stability and confidence return.”
