European buyout exits at new high in 2015

US retains position as largest tech M&A market

The past year has been a busy one for European private equity (PE) firms as many firms take the opportunity to sell or list companies, according to data compiled by buyout firm Equistone Partners Europe for the Centre for Management Buy-out Research (CMBOR).

According to the Financial Times, high stock market valuations and increased merger and acquisition (M&A) activity persuaded PE groups to conclude a record €153.2bn (£112bn) of deals in 2015, a third more than last year and even exceeding the pre-crisis boom years of 2006 and 2007.

Initial public offerings (IPOs) and trade sales – where a company is acquired by a rival in the same sector – were particularly strong, at record levels of €48.7bn and €63.8bn respectively.

Although there has been increasing nervousness in the credit markets over recent months, 2015 will also be the busiest year for leveraged buyouts since that period with more than €80.9bn worth of deals. Although less than half the 2007 figure of €172.9bn, this year has been the fourth busiest ever (after 2005, 2006 and 2007) for European PE despite average buyout prices hitting record highs.

The FT reports that UK deals valued at over €1bn included the sales of gym chain Virgin Active and fashion retailer New Look to South African investment company Brait. Germany was again Europe’s second-largest buyout market after the UK with €12bn of transactions.

This year also saw the proportion of equity versus debt used to finance buyouts fall below 40% for the first time since 2007, as groups used more leverage for larger targets.

“2015 clearly shows that big deals are back, as shown by the highest average deal value and number of billion plus deals since 2007,” said Christiian Marriott, investor relations partner at Equistone. “With the final quarter proving strong for both deals and exits, the European private equity market will start 2016 with positive momentum.”

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