Buyouts persevere as industry darling

Kimberly Romaine
25 January 2010

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Despite predictions just a year ago of the demise of up to 40% of buyout firms, and defying crippling credit conditions, buyouts managed to outperform their venture and growth/expansion brethren in the last three months of last year across Europe, according to the latest unquote" Private Equity Barometer, produced in association with Candover (see cover). Though figures are dwarfed by the previous year's, the asset class clocked up its third consecutive quarter of activity growth. Fans of Gerschenkron would attribute this to its very low starting point - and some cynicism is warranted - but it is important to acknowledge the slow-but-steady recovery the market is making

This is not the case across the board, and comparing buyouts to other deal types highlights how buyouts have bounced back. Despite optimistic tones that venture was set to benefit from the buyout space's prophecised collapse, its 2009 activity was down a third on the previous year. In a telling move, Atlas Venture, once deemed one of Europe's top-tier venture firms, shut its London office.

There are reasons to believe the recovery in buyouts will continue apace. Firstly, last year went out with a bang. Two mega-deals - Marken and Springer - proved that mega-deals had been hibernating, not dead. This substantiates an appetite from investors as well as the all-important willingness from banks to do such deals.

Secondly, the UK economy may be stabilising at last; as unemployment falls, growth in Q4 looks set to be confirmed, and the euro's fall benefits the sterling's value - though admittedly the recovery remains fragile. Finally, people are simply more upbeat. From private equity firms beginning to rehire in earnest, to entrepreneurs preparing to team up with private equity (see page 13), there are indeed signs that the market is re-emerging from the hatches they'd battened down not too long ago.

Yours sincerely,

Kimberly Romaine, Editor-in-chief, unquote"; Tel: +44 20 7004 7526; kimberly.romaine@incisivemedia.com.