Failed auctions accelerate as sellers' market peaks – research

According to the research by the bank, which has been tracking failed auctions in the EU since 2008, there were a total of 282 failed processes in the rolling five-year period to December 2019. The last two years have seen a sharp increase in numbers – as of June 2018, that rolling figure stood at 166 processes.

The UK is the region with the highest figure, accounting for 54% of all failed auctions since 2015.

"Partly this figure is a function of size: the UK is the largest EU market for private equity deals, so the dynamics are most pronounced in this region," Christian Hess, head of Investec's private equity client group, said in a statement. "However, the political uncertainty in the UK will certainly have impacted auction processes, particularly in sectors like consumer where it is difficult to price future cashflows."

According to the research, valuations are approaching their peaks and advisers feel increased pressure to promise high valuations to win mandates. In turn, the high price tags tempt sellers to put their companies on the market opportunistically, perhaps before a company is fully ready for sale.

The research also highlights a link between deal size and propensity for failure. For example, deals with EVs below £250m accounted for 59% of all failed auctions, while deals with EVs over £1bn accounted for 14%. 

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