Trade sales led realisation activity in 2011, according to the latest listed private equity Cash Flow Compass report published by LPEQ and Deloitte.
The report reveals that some 57% of direct fund realisations in 2011 consisted of trade sales as companies used their record cash surpluses to buy attractive business. This was almost double the 29% for the whole of 2010. Secondary buyouts fell to 20% in 2011 from 39% in 2010.
Furthermore, realisations were across a larger range of sectors in 2011 compared to 2010, with deals in the healthcare industry comprising 40% of the total in 2011, followed by industrials at 25% and information technology at 10%.
New commitments made by listed private equity (LPE) fund-of-funds throughout the whole of 2011 almost tripled when compared to the same period in 2010, and were significantly higher than total funds committed in 2010. Over 50% of the funds committed in 2011 were in the third quarter alone.
The comparative increase in investment private equity funds by LPEQ‟s fund-of-funds can be attributed to fund-of-funds strengthening their balance sheets over 2010 and the beginning of 2011, in response to the volatile market.
Ian Armitage (pictured), Chairman of LPEQ, says: “Sales of businesses to trade buyers increased sharply over the past year, representing just under 60% of total sales. Acquirers used their record cash surpluses to buy companies that have been improved under the private equity model of ownership.”
David Barnes, Partner, Deloitte says: “In our second research report activity levels of LPEQ‟s members have remained resilient and new commitments to private equity funds in 2011 significantly outpaced those in 2010. It will be interesting to see how growing uncertainty about the global economy will impact listed private equity in the New Year.”
