Strongest quarter for European private equity buyouts since 2010
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Strongest quarter for European private equity buyouts since 2010

02 Okt. 2013

The European private equity (PE) buyout market has seen a surge in deal values in the last three months with 119 deals completed and €19.7bn in value in Q3 2013, the highest value since Q4 2010 and up 129% by value compared with the €8.6b recorded the previous quarter.

  • Second highest quarter ever recorded in Germany with €9bn
  • Mega-deals driving value up with five buy-outs over €1b in Q3
  • Only two €1bn plus deals in the UK so far this year  

Although deal volume was down by 8%, with 119 deals compared with 130 deals in Q2 2013, mega-deals took center stage and the top five deals in the quarter, with a combined value of €10bn, accounted for over half the total deal value. 

This quarter also marks a significant return for the German PE buyout market, with deal value reaching €9bn, the highest German quarter recorded since Q1 2007 and over 80% higher than the UK’s €5.1bn deal value. Germany is the first market to really threaten the UK’s longstanding leading position, according to the latest data published by the Centre for Management Buyout Research (CMBOR), sponsored by EY and Equistone Partners Europe. 

Sachin Date, Private Equity Leader for Europe, Middle East, India and Africa (EMEIA) at EY comments:

“Germany is being viewed as a safe haven for investment and is ticking all the necessary quality boxes for investors. Its economy is sound and the recent elections passed without any real cause for concern.” 

Christiian Marriott, Investor Relations Director at Equistone Partners Europe Limited, says,

“We have seen a strong quarter for private equity across Europe, with deal values nearly equalling those of the first half of the year. A number of indicators are suggesting confidence is high in the buyout market, with a combination of availability of debt and recently raised funds benefiting overall market activity. 

“Funds which completed successful fundraises in the last year have returned to the market to deploy freshly raised capital. Advent , BC Partners, Cinven and CVC have dominated the top 10 €1bn-plus deals in Europe so far this year, completing six large secondary buyouts between them.  

“A final mark of confidence in private equity’s ability to deliver good returns to its investors can be taken from the top ten deals in the UK buyout market. Six out of the top ten UK exits were from post-2009 deals, evidencing the private equity model of buying at good prices, growing the business and exiting in a 3-5 year period. These included Vue Cinemas and Host Europe (Webfusion), which both completed in Q3. A more settled macro-economic backdrop, increased funding and debt availability, points to a healthy outlook, and we expect to see further successful exits of good assets by the year end.” 

Q3 sees five buy-outs over €1bn, while mid-market deals continues to slow down 

Q3 2013 saw a real slow down in lower mid-market deals (€25m to €100m). Only 26 deals equating to €1.4bn completed, compared with 24 deals and €2.4bn recorded the previous quarter. 

Sachin continues: “Transactions in the €1bn plus deal range held up well across Europe, but there was a slowdown in lower mid-market deals. This increase in mega-deals points to the fact that strategic, large, global and pan-European transactions will complete if the asset meets the buyers’ investment criteria.” 

The top two deals this quarter originated from Germany – taking 44% share of the largest top 10 deals. The Springer Science & Business Media (€3.3bn) was the largest buyout of Q3 2013 and is likely to be the biggest buyout of the year, followed by Ista (€3.1bn).   

PE houses return capital to investors 

The combined value of exits and refinancings so far this year continues to outstrip the value of new deals in Europe. There have been 276 exits, with a combined value of more than €51bn recorded so far in 2013 and over €31bn worth of refinancing. PE houses are divesting their portfolio companies and are able to return capital to their investors and banks ahead of making new investments and raising new funds. As Sachin explains, “It has been clear for some time that the backlog of exits necessary to free up investment resources was weighing on the European buyout market. We are starting to see this overhang clear and continuing exit activity will help the buyout market return to growth.” 

There was a big increase in the debt to equity ratio in both UK and the rest of Europe. In €100 million plus deals, the contribution of debt is the highest since 2007; many larger deals are being done with 60% debt, bolstered by new, non-conventional players entering the market. Overall the market activity benefited from a combination of a freer debt market and more equity funding available. 

UK market losing ground in deal values 

Despite a 64% increase in value with €5.1bn raised from 47 deals, recorded in Q3 2013 compared to €3.1bn (45 deals) in the previous quarter, the UK’s PE buyout market remained relatively slow. While deals in €500-1bn range increased, it was surprising to see only two €1bn plus deal so far this year (Vue Entertainment and B&M Retail). 

Says Sachin: “This low level of mega-deal activity in the UK is somewhat of a conundrum – the capital and debt markets are healthy and the UK has access to some of the best leveraged finance in Europe, which should result in more deal activity at this level. With strong competition for assets from corporate buyers, PE houses may be finding themselves unable to compete for these high-value assets. The recent Lucozade Ribena deal is a clear example where a strategic corporate buyer was successful despite strong interest from PE.” 

Unbalanced picture across Europe 

Although activity in the UK and Germany in particular has picked up this quarter, the same is not true across other countries with the French buyout market, for example, being particularly weak when compared to the healthy levels of activity seen in 2011. Activity in France was driven by two main deals: SMCP/Sandro/Maje/Claudie (€650m) and Maisons du Monde (€650m). Similarly, Sweden experienced slow levels of activity which is likely to be down to the cyclical nature of PE. From 2010 to 2012, there was lots of deal activity and the PE firms will need to churn these assets in 2014 to 2016, hence the lull in activity in 2013. 

Sectors buoyed by mega-deal activity 

There has been little change across all sectors in terms of deal volumes but some stand-out deals have driven a significant pick-up in value – namely in the Telecommunications, Media and Technology (TMT) sector; Business & Support Services; and Manufacturing. Deal value in the TMT sector had picked up in the second quarter and rocketed in Q3 with €5.0bn from 23 deals. Business & Support Services also saw a sharp increase from €1.2bn (Q2 13) to €4.7bn and 16 deals this quarter. Deal value in Manufacturing doubled from €2.0bn to €4.0bn. 

Outlook

Sachin concludes: “So far in 2013 European market conditions have meant that deal processes are both longer and more difficult and the low levels of deal completions have not always reflected market activity. As several key deals successfully completed this quarter, it feels like a more accurate reflection of what we are seeing in the market. 

“It is also encouraging to see the deal pipeline still growing and a number of deals should complete this year, particularly in Germany. However, whether this upsurge in activity means the European PE industry is back in full recovery mode remains to be seen but the signs are certainly positive.”

Pressekontakt

DEUTSCHLAND / SCHWEIZ / NIEDERLANDE

München, Zürich, Amsterdam

  • IWK Communication Partner
  • Ira Wülfing / Florian Bergmann
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FRANKREICH

Paris

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  • Agnès Catineau/Aurélia de Lapeyrouse
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UK

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