SBOs subside in 2012

Greg Gille
05 February 2013

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Following a record 2011, the volume of “pass-the-parcel” deals abated slightly last year – but primary transactions still have a long way to go before returning to their pre-crisis glory.

Buyout dealflow as a whole suffered last year, with a 10% drop in volume compared to 2011. Surprisingly, secondary buyouts bore the brunt of it as the number of deals sourced from fellow GPs declined by nearly a fifth year-on-year and accounted for around 30% of all deals, according to unquote" data.

The SBO's fortunes fluctuated throughout the year, though. The first quarter started with low secondary dealflow by historical standards, with such deals accounting for 24% of all buyouts, but by Q3, that number had risen to a hefty 38%. Notable SBOs announced over the summer included Hellman & Friedman buying UK-based consultancy Wood Mackenzie from Charterhouse in a deal that valued the business at £1.1bn. However, by Q4, SBOs had become rarer – in line with the overall buyout market – but still accounted for a third of all transactions.

The overall 30% figure for last year does contrast with 2011, when SBOs accounted for a sizable 35% of all buyouts in volume terms. This came on the back of a 40% increase in the number of such deals compared to 2010, a year which itself had seen SBOs recover at a much faster rate than the general buyout market.

But although the rise of the SBO has been thwarted for now, deals sourced from other private equity houses remain much more prominent than they were pre-crisis. In 2008, SBOs accounted for 20% of all deals in volume terms. Their market share of the overall buyout market between 2003 and 2007 averages at around 26%.