
The rise and fall ... of the UK private equity market
unquote" reflects on the ups and downs the domestic market has seen since the newsletter began tracking it in 1992
1992The market was nascent, and unquote" launched to follow it. Only one buyout in 1992 saw a total value of over EUR100m and the average deal of this type was more likely to be around the EUR10m mark.
- LGV launches the first of its annual funds, creating an alternative to the typical 10-year structure
LARGEST DEAL
EUR103m buyout of Gaymer Group by Advent, Candover, Cinven, Legal & General Ventures
1993
Economic woes still saw private equity activity clock up around a deal a day being recorded until October, when completion rates picked up significantly.
The beginnings of a trend that would define much of the rest of the 1990s were being witnessed: deals were clearly getting larger. The average size of a UK private equity backed deal more than doubled between 1992 and 1993 and all five of the country's largest deals were valued at comfortably over EUR100m.
- CVC Capital Partners spins out of Citicorp
- 3i announces it is considering raising external capital for the first time (eventually closes over target in 1994)
LARGEST DEAL
Backing for the EUR518m Gardner Merchant deal involved almost all of the country's largest investors in a six-strong club buyout (Candover, Legal & General, Prudential Venture Managers, Barclays Development Capital, Charterhouse, Cinven)
1994
Improving economic conditions and returning confidence levels had a significant effect on the UK private equity market in 1994, with the volume of deals rising 50% from around 250 to nearly 390; meanwhile, deal values rose more modestly (around 17%) to just over EUR4bn.
The top five UK transactions all fell between EUR120 and EUR130m. Also, while club deals had been very much the order of the day, a glance over the list of backers in the top five list shows fewer participants over all and two deals in which the equity was underwritten by a single buyout house.
- 3i floats on the London Stock Exchange with a market capitalisation of £1.5bn (share price would fell below its IPO offer price for the first time in December 2008)
- KKR makes its first move into UK (albeit indirectly) by backing Glenisla
- ICG announces its plans to float, with a £100m+ price tag
- BC Partners (then Baring) set to be biggest fund of 1994 with EUR450m
LARGEST DEAL
EUR120m buyout of Magic Pub Company by Cinven and Fleming Investments
1995
Deal numbers rose from 386 to 447 and the value of all transactions more than doubling from EUR4.1bn to almost EUR8.5bn.
The average size of deals leapt once again, thanks largely to the privatisation of three rolling stock firms. The acquisitions of Porterbrook, Eversholt and GRS Holdings (Angel Train Contracts) proved to be big winners for the backers involved, though did attract a certain amount of criticism from opposition parties that claimed they had been sold off for a song.
- BVCA launches first performance figures
- Cinven announces plans to go independent via a buyout from British Coal
- BVCA launches first performance figures
- BC Partners goes independent from ING Barings in the wake of Baring's collapse
- Venture Capital Trust scheme introduced
- Launch of Alternative Investment Market (AIM)
LARGEST DEAL
EUR756m buyout of GRS by Nomura and Babcock
1996
Values continued their rise, reaching EUR12bn over the year. Volume grew more gradually.
The acquisition of Annington Homes in October by Nomura's Principal Finance Group (later spawned Guy Hands' Terra Firma) boosted the annual total by over EUR2bn and the average deal size to around EUR35m.
- EVCA launches first pan-European performance figures
- CWB (now Doughty Hanson) raises largest European fund to date with DM1bn (cEUR500m)
- CVC tops it with EUR667m
- Cinven launches first fund since its buyout from the Coal Board
- Pantheon launches first European fund-of-funds
- Barclays launches its Ventures unit
LARGEST DEAL
EUR2bn buyout of Annington by Nomura and Blackrock
1997
574 private equity backed deals were recorded in the UK - an increase of 23% on 1996 figures. The value of the UK market soared by around 40% to reach EUR17bn.
Nomura again made headlines with two mega-deals (Inntrepreneur and William Hill)
- Alchemy Partners born as Jon Moulton leaves Apax
- Schroder Ventures (now Permira) holds $1bn closing on pan-European fund
- Doughty Hanson doubles then record by closing third fund on $2.5bn
LARGEST DEAL
EUR1.75bn buyout of Inntrepreneur & Spring Inns by Nomura
1998
Although the number of buyouts completed in the UK rose slightly between 1997 and 1998, the overall number of transactions, including early stage and expansion deals actually fell for the first time since the launch of unquote".
The two most probable drivers of this were the strong exit and fundraising climate, which was diverting the attention of many investors, and the fact that many UK players were moving up the deal size spectrum to complete fewer, larger transactions. Indeed, the value of the UK market surged again to EUR23.5bn, equating to an average value of EUR65m.
- Taper relief introduced on capital gains tax
LARGEST DEAL
EUR1.5bn buyout of insurance firm Willis Corroon by KKR - its first foray into the UK market
1999
610 deals were completed with a total value of EUR32.7bn, which represents increases of 7% and a whopping 39% respectively on 1998 figures.
While the driver of value growth remained transactions at the top end - note the record value of the Punch Taverns deal - the actual number of buyouts fell for the first time since 1992 and an altogether new trend was emerging: the booming internet sector specifically and technology generally was beginning to gather real pace.
- NatWest (now Bridgepoint) Equity Partners raises £1bn first third-party fund
- Apax Partners announces coordinated final closings of two funds on EUR2.1bn, at the time one of the largest pools of capital raised by a European GP
- Palamon's debut vehicle exceeds EUR300m target with a EUR430m final close
LARGEST DEAL
EUR4.3bn buyout of Punch Taverns/Allied Domecq by Bankers Trust, Morgan Stanley Dean Witter, Texas Pacific, CVC, Soros
2000
The trend towards technology (specifically internet) investments that had become evident in 1999 was firmly embedded by the following year. The number of buyouts, hit by the technology diversion and high price expectations on the part of vendors, tumbled to 1994 levels. Despite this, their values continued an upward path (the average buyout weighed in at EUR140m). However, the number of expansion transactions almost doubled from 217 to 403 and early stage deals rose almost threefold to 280.
- Bank of Scotland announces launch of Integrated Finance team
- Apax Partners announces coordinated final closings of two funds on EUR2.1bn, at the time one of the largest pools of capital raised by a European GP
- DLJ European Private Equity announces the £430m final close of its third European fund - this compares with £133m for its second and £50m for its first
LARGEST DEAL
EUR3bn buyout of Finalrealm by Blackstone and pai
2001
The crash in technology stocks took its toll and deal volumes fell by over 250 to stand at 677.
All categories of deals fell in volume terms, though the 'fewer, but larger' mantra adopted by the UK's buyout industry meant that the overall value of these deals only dropped marginally to EUR29.5bn.
- Saw the birth of names such as Graphite Capital, Phoenix Equity Partners, Sovereign Capital, Adams Street Partners
- Abolition of 20 partner limit on limited partnership funds means private equity firms no longer have to establish parallel vehicles to have more than 20 partners
- 3i transforms its organisational structure along the business lines of buyout, growth capital and venture capital
LARGEST DEAL
EUR3.8bn buyout of Meridien Hotels by Abbey National, Royal Bank PE, Alchemy, Nomura
2002
The UK market continued to contract rapidly in 2002, with volumes across all categories sliding significantly. A total of 424 deals were recorded during the year, less than half the level seen at the peak of the market. Buyouts accounted for a little under 150 of these, while expansion deals still dominated.
In value terms, the UK buyout market witnessed its first major fall since unquote" was launched, with the annual figure sinking EUR9bn to EUR20.5bn.
- Coller Capital closes record secondaries fund on $2.5bn
- Stirling Square Capital Partners announces launch of debut fund with $250m
- Candover closes buy-out fund at EUR2.7bn, exceeding target
- Europe's largest mezzanine fund raised by GSC Partners at just over EUR1bn
- Cinven announces closing of third fund at more than EUR3.5bn
- Apax Europe V closes on over EUR 4bn
- 10% taper relief introduced
LARGEST DEAL
EUR3.7bn buyout of Jefferson Smurfit by Madison Dearborn
2003
The UK's buyout market showed early signs of a recovery in 2003, with both numbers and values growing, albeit slightly. A total of 151 buyouts with an aggregate value of EUR23.3bn were recorded, regaining the lead in volume terms over expansion deals.
Although the technology sector was still providing the greatest volume of deal flow (including some large telecoms plays), the more traditional sectors were closing the gap, with industrials and consumer segments among the most notable.
- Permira raises EUR5bn fund
- Apax and Hicks Muse Tate & Furst float Yell in biggest IPO of the year; partial exit recouped all investments plus more
- PPM Ventures and CSFB in £1.24bn sale of Gala Group to Cinven and Candover - first of many trades of the private equity darling
LARGEST DEAL
EUR3.6bn buyout of Scottish & Newcastle Retail by Merrill Lynch, Blackstone, Texas Pacific, CVC
2004
The growth seen in 2003 accelerated in 2004 against a backdrop of low interest rates, increasing availability of debt and strong consumer confidence. In total, 400 deals were completed in the UK market, with the buyout market showing the greatest strength. The number of buyouts recovered from around 150 in 2003 to nearly 200 deals and their value increased from EUR23.3bn to EUR27bn.
Despite the growth in buyout values, activity at the top end of the scale was comparatively subdued: in each year since 1998, all of the top five UK by size had involved total funding of more than EUR1bn, but in 2004 one of these five deals fell below that mark. Instead, 2004 saw a marked resurgence in deals within the mid and upper madcap markets.
- The amount any one investor can invest in a VCT is increased from £100,000 to £200,000
- HgCapital achieves a 70% IRR on Xyratex float
LARGEST DEAL
EUR2.6bn buyout of AA by CVC and Permira (Permira would later find itself in the hotseat from trade unions over this)
2005
Despite signs that the UK market had been on an upward path, deal activity was subdued in 2005, with a drop in number across all deal types and only around 350 transactions completed in all. Larger buyouts once again drove the value stats, though, and the market saw an increase for the third year running.
- BC Partners raises biggest ever (at the time) fund for investment in Europe with EUR5.5bn
- CVC trumps this with EUR6bn
- Hedge funds (led by Och Ziff) beat off competition from private equity win £400m Peacocks deal
- Permira gets a slice of Gala; Gala acquires Coral Eurobet
LARGEST DEAL
EUR3.2bn buyout of Gala Group by Candover, Cinven, Permira
2006
Despite a comparatively slow start to 2006, activity levels picked up significantly and all types of deals saw increases over the 2005 figures. In total, well over 400 transactions were completed during the year, with August recording the highest single number of deals since the summer of 2001, despite the heat.
The main feature of 2006 was the return of the jumbo deal in a market awash with debt. For the first time the top five UK deals by size all exceeded EUR2bn in value and were headed by the EUR3.5bn acquisition of Eircom in Ireland.
- TDC delisting, biggest deal ever seen in Europe
- Cinven raises largest ever European fund with EUR6.5bn
- Permira supersedes this with EUR10bn (later increased to EUR11bn - and would later allow LPs to reduce commitments by up to 40%)
- Access to top funds becomes even more of an issue for limited partners
LARGEST DEAL
EUR3.5bn buyout of eircom by Babcock
2007
The year saw a total of EUR77.6bn put to work across 535 deals. Boots took the cake as the largest, but there were other very noteworthy deals, too: The EUR9bn AA deal and EUR4.7bn buyout of EMI (which went on to make headlines again and again)
- Abingworth Raises the largest ever life science fund at £300m
- ECI sale of LateRooms nets 500% IRR and 9x multiple
LARGEST DEAL
EUR16.3bn Alliance Boots deal, led by KKR - the largest-ever in Europe, just weeks before the onset of the credit crunch
2008
The year that saw it all fall down. The onset of the crunch in August 2007 took on new meaning in September 2008 with the collapse of Lehman Brothers. In total, just EUR26.4bn was put to work - just a third the previous year's total. The sum was across 408 deals, a less dramatic decline on 2007's 535.
- Charterhouse defies market conditions to reach a EUR3.6bn first close towards its EUR6bn target for its ninth fund
- Permira announces that LPs in its latest and largest fund, which is just over half invested, may reduce their commitments by up to 40% in return for foregoing 25% of the profits. Some lauded the move as clever since it will mark the first of many funds to be cornered into such a move; others saw its as a means of giving long-standing partner SVG a gentle fall from grace.
- Father Christmas brings a high street bloodbath: in December Woolworths, Zavvi (fka Virgin Megastores), MFI, Whittards and Adams all go into administration. At the time of going to press, Whittards had been scooped up by turnaround outfit EPIC. The others are likely a harbinger of times ahead and should prove handsome pickings for distressed specialists
LARGEST DEAL
Candover-led a EUR2.3bn take-private of oil-field services provider Expro International, with Goldman Sachs Capital Partners and AlpInvest also investing
The last time the UK market declined was in 2001-02 following the burst of the dotcom bubble. The drop was 21% in the first year, and hit a trough in 2002. From then it steadily grew, eventually reaching 2000 value levels in 2006. The market has already fallen this year by a staggering 66% from last year's dizzying EUR77.8bn, with the timing of an eventual recovery anyone's guess.
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Venture Mania
- Amadeus Capital Partners doubles size of its previous vehicle with the first closing of Amadeus II on £100m in just six weeks
- ECI Ventures raises £175m in six months, exceeding its original target of £150m
- Avlar BioVentures holds a second and final closing above £20m for its debut life sciences vehicle.
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