European Buyout Market Tops €100 Billion for First Time in 2005


2005 saw further significant growth in the European buyout market with the total value of deals topping €100 billion for the first time ever, according to the latest European Buyout Review due to be published in March 2006 by Incisive Media in association with Bridgepoint.

The volume of €1 billion plus deals reached its highest level in 2005, with substantial increases also recorded in the European mid-market, largely reflecting the level of fundraising activity during the year.

Family and private vendors generated the highest proportion of deal flow in 2005 and the trend for secondary buyouts continued markedly in the year.

The value of UK deals increased modestly over 2004 figures, although the UK's proportion of deal value across Europe slipped to just 26% from 33% in 2004 due to significant deal activity in Continental Europe.

Old economy and consumer-focused sectors attracted the highest level of private equity investment in 2005 with almost half the total value of buyouts in European made in the industrials, engineering, chemicals and support services sectors.

The European Buyout Review, published annually by Incisive Media, provides comprehensive statistics on the level and use of private equity in buyouts across Europe.

Key highlights:

Total value of European buyouts topped €100 billion for the first time: in 2005, the total value of deals totalled €116.5bn showing a 43% increase on 2004.

Volume of €1 billion plus deals reaches highest level: 28 deals valued at over €1bn were completed in 2005 with the total value up 87% on 2004.

Mid-market dominates European market: the total value of deals in the €25m-€500m range rose 17% to €42bn in 2005 with the total volume of deals up 18% to 360 transactions. Deals in the €500m to €1bn range were also up 25% to 34 deals in 2005 with a total value of €24.4bn.

Sources of buyouts:

Proportion of corporate disposals declined: although the value of corporate disposals across Europe rose by almost 21% to over €36bn in 2005, in value terms, the proportion of corporate disposals fell by 10% to less than 30% of all European buyouts.

Family / private vendors rose significantly: the volume of companies sold by family and private vendors was up by almost 32% to 228 buyouts with these types of vendor representing 38% of all buyouts in Europe in 2005.

Significant increase in secondary buyouts: secondary buyouts represented 35% of all European buyouts by value and 27% by volume in 2005. The total value of secondary buyouts rose by over 50% to €40bn and by 32% by volume to 161 deals.

Public-to-privates represented 20% of total deal value: the total value of public-to-privates rose by 3% to €23bn in 2005 in 27 deals although this only represented 5% of the market by volume.

By country / region:

UK investment close to the highest levels seen around the turn of the millennium: the total value of UK buyouts topped €29.7bn in 2005, a rise of 10% on 2004. The proportion of UK deals fell however to just 26% of all European buyouts, reflecting an increase in Continental European transactions.

Record investment levels in France: deal volume in France rose by almost 53% in 2005 to 133 transactions and the value of buyouts almost doubled to €20.6bn, representing a 91% increase on 2004.

Spanish investment soars: Spain saw the most dramatic increases in private equity investment in 2005 with the total value of deals increasing from €2bn in 2004 to €11.7bn in 2005. The volume of deals rose by 90% to 38 in 2005.

Benelux region represents 10% of market share: the increase in market share resulted largely from the 37% rise in deal value in the Netherlands to €8.7bn in 2005 coupled with a 71% increase in deal volume. This compares to Germany which represents 12% of the European buyout market and France 18%.

Denmark recorded largest increase in value: a number of significant buyouts in Denmark fuelled the massive rise in the value of deals from €940m to €9.1bn in 2005. The volume of deals trebled to 20.

By sector:

'Old economy' sectors most popular: the appetite for 'old economy' companies continued into 2005 with investment in industrial, engineering, chemical and support services firms constituting 46% of all European buyouts.

General industrials/engineering sector recorded highest level of deal activity: in 2005, the total value of capital deployed in this sector more than doubled to €16.1bn and the volume of buyouts was up by 20% to 90 deals.

Retail sector second largest in investment terms: transactions totalling €10.8bn were completed in 2005, representing a 25% increase on 2004 with a total of 47 buyouts.

Leisure sector investment tripled: in 2005, investment in the leisure, entertainment and hotels and restaurants and pubs sectors more than tripled to €12.4bn from €3.8bn with the number of deals more than doubling to 43.

Value of healthcare investment rose significantly: following significant deal flow in the sector in recent years, the volume of deals slowed in 2005. However, the total investment in the healthcare sector was up 45% in 2005 to €6.6bn.

Commenting on the research, Kevin Reynolds, the partner responsible for Bridgepoint's investment activity in the UK, said:

"With record levels of investment across Europe in 2005, the private equity market showed no sign of abating, due in part to the significant level of fundraising activity during the year.

"The mid-market continues to be the mainstay of the European private equity market with deals between €25m to €500m dominating the market in terms of volume and the aggregate value of buyouts. We expect this to continue during 2006 with deal flow in Continental Europe growing."

Julian Longhurst, Head of Data & Research, added:

"Consumer-facing sectors such as leisure, retail and healthcare attracted substantial levels of investment across Europe and the trend for 'old economy' investments also continued.

"2005 saw a shift from corporate vendors towards family and private vendors, as well as secondary buyouts which we anticipate will continue throughout 2006. Markets such as France and Spain remain very active and the UK continues to represent a significant, albeit declining, proportion of deal flow."

"One of the defining features of 2005 has been the huge and undiminished appetite among banks and institutional investors for a variety of leveraged finance instruments."

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