Q4 posts lowest deal value for a decade

Though it will come as no surprise that private equity investment in Europe dropped considerably in the final quarter of 2008, the scale of the decline just might; with total deal value falling 59% against the preceding three months from around EUR20bn to just over EUR8bn - the lowest quarterly total since Q2 1997 - according to the Q4 unquote" Private Equity Barometer, produced in association with Candover.

This resulted in an almost identical drop in the final year totals, with the 2008 figure of EUR87bn down 59% from 2007's record EUR198bn. The declines, though, were less severe in terms of volume, which perhaps provides a more accurate reflection of sentiment, given that it is not skewed by the disproportionate influence of a small number of mega-deals. Although Q4 did see a substantial slowdown of around 32% from 382 transactions to 261, 2008 as a whole saw a more modest 14% year-on-year decline to end the year on 1,404 deals - significantly ahead of the number recorded in 2006.

With the crisis in the banking sector rapidly accelerating at the beginning of Q4, following the September collapse of US investment banking giant Lehman Brothers, debt financing became ever more sparse over the three months. Buyout activity therefore suffered most over the period, dropping by 55% and 61% respectively in terms of volume and value from 175 deals worth EUR17bn to just 75 deals worth EUR7bn. Over the year as a whole the volume decline was again less pronounced, falling by 30% from 823 deals to 578, while value fell by 61% from 2007's record total of EUR185bn to EUR73bn.

That the UK is being hit hardest by the current banking difficulties is evidenced by the regional breakdown, which displays a dramatic fall from grace for a country that has for so long dominated the European private equity scene. Volume saw an almost two thirds decline from 36 deals to just 13, while value recorded a remarkable 93% drop from EUR4.4bn to a mere EUR338m.

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• Topics
• Performance
• UK / Ireland