Buy-outs and deals in decline

Nov 18 2009 by Peter McCusker, The Journal

THE total value of private equity-backed buy-outs in the North East fell by 60% in the first nine months of 2009 to £65.9m compared with the same period last year (£166.5m), according to the Centre for Management Buy-out Research (CMBOR).

As expected, the number of deals in the region also declined, with just 12 buy-outs completed in the first nine months of 2009, compared with 24 for 2008.

In addition, the average deal value for the first three quarters of 2009 was just £5.5m, down 13% on the 2008 figure (£6.3m) and 41 per cent on 2007 (£9.4m).

The North East has seen a marked decline in both lower mid-market (£10m-100m) and small deals (less than £10m) in the first nine months of 2009.

There has been just one lower mid-market deal in 2009 (£50m) so far, compared to five in 2008 (£148m) and three in 2007 (£158m). There has not been a mid-market deal (over £100m) since 2006.

Manufacturing businesses proved to be the most popular targets for deals in the region, with five buy-outs totalling £8m. However, it was a single £50m lower mid-market deal in the Healthcare sector that made up 52% of total deal values.

Family and privately-owned businesses represented the biggest source of buy-outs in frequency in the first nine months of 2009 with five deals totalling £9m, while there were also five companies’ bought out of receivership in deals amounting to £6m.

John Walker, director at Barclays Private Equity in the North, said: “With values for the first nine months down considerably, the market in the North East is failing to show any indication of a sustainable recovery as conditions remain testing.”