The unquote" forecast: Buyout activity approaches 2008 levels

Looking back over the past decade, data from the unquote" database Private Equity Insight indicates that the number of European buyouts completed in the first seven months of the year account for 58% of the yearly total on average - proof that PE activity is fairly well-spread across a given year.

Extrapolating on this trend, and given the 275 transactions recorded between January and July, European GPs should complete in excess of 470 deals by the end of December 2011.

While up 17% from last year, this anticipated volume still falls well short of the 612 transactions recorded in 2008 despite Lehman's collapse. Even assuming that activity could heat up by December as it did in 2009 - when deals completed by July accounted for just half of the yearly total - this figure shouldn't breach the 600 deals mark.

All is not lost though: should the large-cap recovery witnessed so far this year continue, the overall value of 2011 buyouts would mark a significant return to form for the industry.

Deals completed in the first seven months of the year historically account for 57% of the yearly value total on average. Once again, extrapolating from this data indicates that European buyouts should amount to an overall €80bn by the end of the year, comfortably exceeding the €73bn recorded in 2008 and marking a sizeable 21% increase on last year's €66bn.

That said, current market uncertainty could negatively impact PE activity in the coming months. Large buyout players have most to fear here, as various reports indicate that difficulties in the high-yield bond market are likely to complicate financing for large-cap deals. Even if this market is not expected to shut down as it did in 2008, lenders seem increasingly hesitant to bridge risky deals and leveraging larger transactions is proving costly.

UK activity will also be a significant indicator going forward. Traditionally the locomotive of European PE activity, dealflow in Britain has been lacklustre so far this year. While a delayed uptick there could positively impact 2011's activity levels, several industry participants fear that UK dealflow could remain subdued in the coming months.

Although not yet cause for celebration, estimated buyout activity figures for 2011 are at least welcome news on two fronts. Firstly, the surge in the overall value of investments could reassure LPs, as PE firms work towards reducing the large amount of dry powder accumulated during the crisis. These figures also highlight something unquote" has witnessed since late 2009, that the industry is well on the road to recovery.

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• Topics
• Buyouts
• Small-cap buyout
• Mid-market buyout
• Large-cap buyout