Holding periods lengthening again following 2015 drop

When it comes to the average holding period for European assets exited by their buyout backers on a given year, 2014 seems to have been a breaking point: following a steady rise in the aftermath of the financial crisis, holding periods started shortening to fall back in line with the historical average and industry standard of around five years.

Buyout assets sold in 2014 had an average holding period of around 6.1 years according to proprietary statistics from unquote" data, compared with 6.6 years for those exited in 2013 – although still a long way from the record low of 3.7 years seen at the height of the private equity boom in 2007. This hint at a shorter investment lifespan was confirmed last year: buyout assets exited in 2015 across Europe had been backed by their private equity owners for 5.3 years on average, a 13% drop in the space of a year.

Preliminary figures for assets exited so far in 2016 are not pointing towards a continuation of this trend, however. The average holding period for buyout investments sold in the first six months of the year currently stands at an even six years, closer to the figure seen in 2014. It must be noted that this is still slightly below the average seen across the 2012-2014 period.

As usual, there is considerable variance in the holding periods observed for European assets. At the shorter end of the spectrum, Towerbrook Capital Partners sold its majority stake in Dutch frozen food producer Van Geloven to Canadian trade player McCain Foods in March after only a year. In the UK, LDC recently scored a healthy 6.1x multiple following the sale of pubs business New World Trading Company to Graphite Capital after a three-year holding period.

Other assets have spent considerably more time in private equity portfolios, although such long holdings can ultimately award GPs with substantial returns. Palamon Capital Partners, for instance, generated a 13x return on its sale of Towry to Permira-owned Tilney BestInvest in a deal worth £600m in April. The vendor had first invested in the company in 2003 and went on to support 16 bolt-on acquisitions.

Quick turnaround in DACH
When it comes to regional disparity, the DACH area is seeing holding periods well below the European average so far this year. Assets sold in the region in the first half of 2016 had been sitting in private equity portfolios for an average of 4.4 years, continuing a trend of shorter hold periods in the region compared with the rest of Europe, visible from 2012 onwards.

On the other hand, the Nordic countries, France and the Benelux region are three areas where holding periods for assets sold in recent months sit above the European average. The UK is closer to that six-year mark, but the increase compared with last year's average holding period of five years in the country is more pronounced than in the other continental regions.

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