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Private equity market contracts as larger buyouts remain sparse

Emanuel Eftimiu
20 April 2011

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The European private equity market shrunk to its lowest quarterly total in a year as transactions at the top end of the value spectrum remain conspicuous by their absence, according to figures from the latest unquote" Private Equity Barometer.

The Q1 2011 barometer reveals that, despite optimistic talk in the market, private equity activity made a sluggish start to the year with 236 deals worth €12.2bn - down 7% and 48% respectively from 253 deals worth €23.3bn recorded in the final quarter of 2010 and the lowest quarterly totals seen since the same time last year.

The substantial fall in value is mainly due to a sharp quarterly decline in the buyout segment. While the 92 private equity-backed acquisitions recorded over the three months to March represent a 16% decrease from the 110 deals seen in the preceding quarter, overall value almost halved to €10.8bn from the approximate total of €21.7bn witnessed in each of the previous two quarters.
Particularly the top end of the market, represented in the barometer by the size bracket covering deals worth in excess of €1bn, continued the slowdown that set in following the strong third quarter of 2010. There were two transactions in this deal range, First Reserve Corporation's €1.2bn acquisition of Ansaldo Energia in Italy and the €1.1bn The Priory Group buyout by Advent International in the UK.

The shift towards the lower end of the deal value spectrum was further emphasised by the drop in volume and value figures in the €100m-1bn size bracket to 19 deals worth €6.1bn - half the 38 buyouts worth €12.3bn recorded in Q4 last year. Consequently, the small-cap segment, covering deals worth less than €100m, showed much greater resilience with 77% of all buyouts recorded in this quarter falling in this deal bracket.
On a positive note, Q1 buyout totals are significantly higher than those registered in the same period last year - volume is up 22% from 76 to 92 buyouts while value rose by 12% from €9.6bn to €10.8bn - suggesting that the market is in better health than at the beginning of 2010.

The growth capital space has further positive news, bucking the trend of its later-stage cousin by recording a slight uptick in deal numbers by around 6% from 96 to 102 quarter-on-quarter.

The full unquote" Private Equity Barometer with detailed analysis of the European buyout, growth capital and venture capital markets is available to download in our research centre.