Hg Capital Trust (LSE:HGT)
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5 Years : From Oct 2011 to Oct 2016
European buyout activity has ground to a halt because of the ongoing economic uncertainty and experts expect little change for the next six months.
In the three months to June 30 there was just EUR9.1 billion ($11.35 billion) worth of deals, down 34% from the first quarter and 58% lower than the same period last year, according to recent figures from the Centre for Management Buyout Research.
"There is a total lack of confidence in the economy," said Sachin Date, head of Ernst & Young's EMEA Private Equity business.
"Buyers are reluctant to put equity into deals and sellers know they won't get full value because of the economic malaise," Mr. Date added.
Private-equity buyers aren't even prepared to avail themselves of the debt that is becoming available as banks loosen their purse strings to finance the acquisition and recapitalization of good companies.
The only deals being done are those by Asian and U.S. trade buyers that can afford to take a longer term view and are looking to grow market share or expand geographically, Mr. Date said.
In the last few weeks alone, U.S. drugstore chain Walgreen C. (WAG) splashed out $6.7 billion for a 45% stake in Kohlberg Kravis Roberts & Co.'s Alliance Boots health-care chain, while HgCapital sold its talent-testing company U.S. group Corporate Executive Board Co. (EXBD) for $660 million.
In Europe, the U.K. continued to lead buyout activity with EUR3.3 billion worth of deals done in the second quarter, according to CMBOR. Surprisingly, Germany, considered the strongest economy across Europe, saw the number of deals completed during a quarter fall to single digits for the first time in years.
"Because of its strong economy German sellers may have stronger price expectations--but there is also the possibility that even a strong economy is being tainted by its currency," Mr. Date said.
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