European Buyout Market on Hold Amid Economic Uncertainty
July 06 2012 - 9:12AM
Dow Jones News
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.
Write to Marietta Cauchi at marietta.cauchi@dowjones.com
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