UK private equity has made a slow start in the first quarter of 2016, following the highest number of buy-outs since 2007, according to figures published by the Centre for Management Buyout Research (CMBOR) at Imperial College Business School.
The latest research, sponsored by Equistone Partners Europe Limited, shows that after positive growth in 2015, buy-outs in the UK were negatively affected by the turmoil in global markets at the start of this year. The first quarter reached the lowest total value since the end of 2009.
In 2015 there was GBP21.1 billion invested in UK buy-outs – the highest since 2007. This increase in value was largely down to the re-emergence of GBP1 billion plus buy-outs in the UK. The new research shows that at the start of 2016 activity was lower, with just GBP3 billion invested by the end of March.
The latest figures also show that the exit market for buy-outs has so far failed to continue the progress made in 2015, with exit numbers and value also beginning the year at a low rate. In 2015 the total market exit value for buy-outs surged to a new record for the second successive year with GBP47.9 billion recorded.
According to the researchers, the number of buy-outs in the UK has been extremely low in recent years with only 373 completed in 2013 compared to a record of 722 in 2003. The numbers improved in 2014 to 421 and remained at that level in 2015. In the first quarter of 2016, only 92 buy-outs were completed.
Mike Wright, Director of the Centre for Management Buyout Research at Imperial College Business School, says: “These figures reflect fluctuating global markets which have already reacted to falling energy prices, and the possibility of reduced GDP growth in China. The uncertainty surrounding the UK’s decision to stay in or leave the EU is also likely to have an impact on business decisions.”
Christian Marriott, Investor Relations Partner at Equistone Partners Europe Limited, says: “Uncertainty around the EU referendum is definitely putting some deals on hold, but there is still an underlying level of activity around UK companies that are either wholly domestic or exposed to markets outside Europe. But it looks like the first half of 2016 will be a quiet one for the UK buyout market.”
The report showed that market exit value has risen for four consecutive years after recording just GBP11.7 billion in 2011. However, the exit market in 2016 started relatively slowly with just GBP6.8 billion recorded by the end of March.
The number of UK exits rose in 2014 to 323 after 301 in 2013. In 2015 exit numbers were lower, with 286 recorded by the year end and 2016 has started slowly with just 53 exits in the first quarter.
