MBO/MBI Market Headlines

Overview

The UK buy-out market has declined dramatically in 2009 with the total value recorded being £3.4 billion from just 176 buy-outs. These statistics taken together with 2008, in which a total value of £19.7 billion was recorded from 578 deals, are deeply concerning when compared to the record £46.5 billion achieved in 2007 from 673 deals.

Total value for the first six months of 2009 is the lowest half year total recorded since 1996, with activity in terms of deal flow back to mid 1980 levels.

It is nearly two years since the credit crisis hit the UK and there are indications that the economy is at the very least beginning to stabilise. Whether this will lead to an upturn in the buy-out market in the short term is still a matter of uncertainty./p>

MBO/MBI makeup

Management buy-ins and institutional buy-outs (MBI/IBO) rather than management buy-outs (MBO) have continued to make up the majority of total market value since 1996, with a record MBI/IBO value of £35.5 billion and a record MBO value of £10.6 billion being achieved in 2007.

The MBI figures have fallen significantly since 2007 when 264 deals were completed. 198 MBIs with a total value of £15 billion were recorded in 2008 and only 52 MBIs with a total value of £2.9 billion have been recorded in the first six months of 2009.

Similarly, the MBO figures have fallen sharply since 2007 when 409 deals were completed. 380 MBOs with a combined value of £4.7 billion were recorded in 2008 and only 124 MBOs with a combined value of £549 million have been recorded for the first half of 2009.

Transaction value ranges

In the £10-100 million range deal numbers fell from 196 in 2007 to 137 in 2008, with just 19 transactions in the first half of 2009.

The <£10 million range has also fallen sharply with just 152 transactions in the first 6 months of 2009 after 402 in 2008 and 410 in 2007.

Following a record 67 buy-outs totalling £39.1 billion in the £100 million plus transaction size range in 2007, large deal flow has rapidly declined with 39 buy-outs totalling £14.4 billion in 2008 and only five buy-outs totalling £2.5 billion being completed in the first half of 2009 within the same deal size range.

Since 2003, average transaction value increased annually before it surged to £69 million in 2007 influenced largely by the £11.1 billion Alliance Boots deal. The average fell in 2008 to £34 million and stands at just £19 million during the first six months of 2009.

Regions

During the first half of 2009 30 transactions have been completed in the South East of England, 26 in the North West and 23 in both the London and Yorkshire /Humberside regions. By value London is the largest region with £1.4 billion from its 23 deals.

Source of buy-outs

Buy-outs from failed companies usually account for less than 20% of the total market, however, in 2009 this source has provided for a third of all new deals./p>

TMT is the largest sector by value during the first half of 2009 and the manufacturing sector is the largest in terms of number of deals at 42 with TMT and Retail both having 24.

Exits

Following the record number of 419 exits in 2007, 330 exits with a total value of £9.9 billion were recorded in 2008. In 2009 124 exits have been completed, valued at just £1.0 billion, with 85 of these exits into receivership.

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