2013: long on exits, short on new deals

The final quarter of last year was a strong one, but it masks an otherwise lean year for European buyouts, according to John Arney, managing partner at Arle Capital Partners. "We are headed for another lean year in terms of new deal activity for 2013 in European private equity. However, there will be a steady flow of exits, perhaps a slightly higher level [than last year] as there are a lot of pent-up transactions from the boom years of 2006-H1 2008. There will be less fire-fighting this year than many had to undertake with existing portfolio companies as the macro environment is less harsh – but it won't be easy."

It may be that larger deals fare better in terms of accessing finance – a trend seen in Q4 2012, when eight mega-buyouts (EV >€1bn) were recorded, the highest number since Q2 2011. Says Kit Tuke, Arle's head of debt, "The financing market is now being driven largely by the US market. The remit has widened over 2012 in terms of what US lenders will finance. It has shifted from oil and gas businesses and ones with a US story to one where now any business that wants to borrow USD can approach a lender in the US."

Tuke goes on to explain that high-yield bonds are pricing at an all-time low: "Political news is a key feature of financing markets. The renegotiation of the US's fiscal cliff may, some hope, lead to the debt ceiling being renegotiated. There seems to also be an assumption that Europe may sort out its problems so there is a lot of optimism right now. The cost of high yield is thus the lowest it has ever been, at below 6% on average." He suggests the positivity will spill over into the loan market, but warns of headwinds in the financing market, namely CLOs running out of time on their reinvestment periods and the need to fill the gap they'll leave.

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• Topics
• Buyouts
• Early-stage
• Expansion
• Arle Capital Partners
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