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'09 Mac-daddy just a third of '05 record - Wood Mac SBO sale highlights changed times

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After months of waiting with bated breath, beleaguered buyout house Candover has finally completed the sale of Wood Mackenzie: Charterhouse will acquire the company for £553m in what will be the UK's largest buyout this year.

The deal highlights a few important points. Firstly, sizeable buyouts are rare but not impossible. Until now the largest UK buyout this year was Chesapeake at £326m. In fact, this year's largest deal is a far cry from the same period in 2005 - the year Candover first invested in Wood Mackenzie (see table).

This latest SBO also illustrates a new way of doing deals. So keen are some vendors to offload assets - Candover is nothing if not cash starved - they are often stumping up some of the cash themselves: Candover lent £20m to the buyer to seal the deal.

Indeed, the acquisition by Charterhouse is giving investors hope that the market is beginning to turn; it will also give Candover a renewed chance for survival by helping to reduce its £64.9m debt pile by more than half.

The sale will give Candover enough capital to avoid breaching its banking covenants as it will generate total proceeds of £36.2m. This is comprised of cash proceeds worth £19.6m, and an additional cash payment of £16.7m as a result of carried interest payments from the Candover 2001 Fund. Candover had valued the business at £20.5m at year-end 2008.

Proceeds from the transaction could also give the ailing private equity firm some leverage when reviewing its options to stay afloat, which include an outright takeover, a minority stake sale or a fundraising.

Analysts remain unconvinced that Candover is free from peril. There is still considerable worry over the firm's EUR3bn fund as, earlier this year, Candover announced that it was no longer in a position to commit any capital (the contribution from the buyout house was to be EUR1bn), while in April, it suspended investment from the 2008 fund for up to six months. It also has £90m of outstanding commitments to its 2005 fund.