SBOs hit new peak in 2013

Is there an end in sight to the rise of "pass-the-parcel" deals? Looking at new proprietary statistics from the unquote" database, SBOs have clearly become an essential component of the European buyout market. Deals sourced from fellow GPs accounted for a whopping 40% of all buyouts in volume, and 55% when looking at their contribution to the overall value of European investments last year.

This is a marked increase on 2012 figures (31% and 50% in volume and value respectively) and in fact the highest percentages ever recorded by unquote". By comparison, the proportion of SBOs averaged at 26% in volume and 37% in value between 2003 and 2007.

Last year's hike wasn't evenly spread across Europe, though. SBOs gained ground in almost all European regions last year – bar in Benelux – but the increases were particularly noticeable in France and the UK as the countries' hectic activity during the boom years keeps fuelling a steady stream of disposals by GPs.

As is traditionally the case, France took the crown with 60% of all buyouts being sourced from other private equity houses, against 40% in the previous year. Notable examples included BC Partners' $1.3bn acquisition of animal tags business Allflex from Electra, as well as the €650m SBO of furniture retailer Maisons du Monde by Bain – both deals were inked in June.

The UK also witnessed secondary transactions creeping up from 26% of all buyouts in 2012 to 36% last year. Vue Entertainment was a standout, with Doughty Hanson selling the cinema group to Omers Private Equity and Alberta Investment Management Corporation for £935m in July.

The prominence of "pass-the-parcel" deals is no longer confined to the upper end of the market either. The contribution of SBOs to lower mid-market dealflow (here defined as deals valued in the €50-250m range) has risen year-on-year since 2009 and broke the 50% barrier for the first time last year, according to unquote" data.

Sentiment in the industry remains divided when it comes to secondary transactions – with GPs understandably keener on emphasising their merits compared to more cautious LPs. That said, most should welcome the positive trend witnessed in 2013: the growing appetite displayed by US private equity houses for European mid-cap portfolio businesses, with UK players, in particular, supplying quality dealflow to their counterparts across the Atlantic (read our analysis on the topic here).

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