CMBOR highlights difficulties of current exit market

16 December 2002

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The backlog of private equity investments awaiting realisation is revealed in a report recently published by Deloitte & Touche and Barclays Private Equity. The report, Exit, provides data compiled by the Centre for Management Buy-Out Research (CMBOR) on the number of investments made and realised over the last 20 years, highlighting the mounting pressure on investors to crystallise returns. While the expected duration of a buyout investment is between three and five years, the report shows that less than a quarter of three and four year old deals and just over a quarter of five year old deals have exited. The average time to exit has increased steadily over the two decades, reflecting the growing build-up of investments. In 2001, the average lifespan of an investment was just over five years, compared with three years in 1982. Indeed, last year saw the lowest level of exits since 1995 as the slump in M&A activity hampered flotations and trade sales, the traditional exit routes. Since 1996 total exit value has fallen significantly short of new deal value. Trade sales have shown a particularly dramatic decline, from a high point of 137 deals in 2000 to just 60 in 2002 to date. Trade sales are now at the lowest level since 1992. Secondary buyouts have increased. So far this year 50 of these deals have been recorded compared with 36 for the whole of 2001 and 28 in 2000.