EUROPE - EVCA report shows sharp rise in turnaround deals

Deborah
03 December 2009

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While investment activity in 2009 has slowed significantly, new research published by the EVCA today shows that the downturn has provided a sharp rise in turnaround opportunities, which were up 40% in the first nine months of this year against the same period in 2008.

The EVCA European Buyouts Report also unsurprisngly underlines that, in the absence of debt, average debt-to-equity ratios have fallen from 57% for larger transactions and 47% for smaller deals in 2004-2007 to 36% and 31% respectively in 2009.

As pricing of debt has increased in this economic climate, the use of mezzanine debt has declined sharply from 9% to 4%.

Further, and in keeping with the strategy of nursing current portfolios, of the 993 companies supported with private equity funding this year, 59% of these received follow-on financings. Significantly, this is the first time the EVCA has seen follow-on investments outstrip primary activity.

The most active region in investment by value this year has been the UK and Ireland with 28% of activity. This mirrors the findings of the recent unquote" Q3 Barometer, published in association with Candover, which stated that in both value and volume in Q3 of this year, the region topped the charts with 22 buyouts worth EUR 2.7bn collectively.

With LPs tightening their grips on capital, fundraising fell sharply in 2009, with only EUR 6bn raised in the first nine months of the year, compared with EUR 69bn over the whole of 2008. Moreover, 19 funds reached final close in 2009, a drop from the 66 closed in 2008.

According to the report, the highest proportion of investors in European funds are based in the UK, followed by France.