Private equity investment in the UK reached just £2.0 billion in the first quarter of 2009 according to the Centre for Management Buy-Out Research (CMBOR), with two thirds of this total from just one deal.  This is compared with £1.3 billion in quarter four 2008 – the lowest quarter for over 13 years.  CMBOR, the UK’s leading provider of research and analysis on the private equity market, sponsored by Barclays Private Equity, also reported that deal numbers declined to just 61 in Quarter One, from 92 in Quarter Four and 152 in the same period in 2008.

“We are witnessing a market showing little sign of life, much as we predicted towards on the back of a very quiet end to 2008.” said Christiian Marriott, Director at Barclays Private Equity.  “The very quiet first quarter is likely to lead to a very quiet 2009 and we expect few signs of green shoots of recovery.”

Analysis of CMBOR’s findings reveals that public-to-privates during the first quarter of 2009 accounted for over 71 per cent of all deals by value (£1.4 billion) from five de-listings.  Of the total 61 deals 38 per cent came from receiverships which accounted for 14 per cent of all deals by value.  Secondary Buy-Outs, which had slowed to 12 per cent of all deals in 2008, continued to decline in the first three months of 2009 accounting for less than seven per cent of market share.

“Whilst there has been an increase in the share of public-to-private deals there has been a corresponding decline in the number of family/private deals.  These deals, which had been growing in market share since 2003, accounted for just over a quarter of deal flow and seven per cent of all deals by value.  It seems that the only willing sellers in this market are the public markets.” Marriott continued.

The exit market has also remained slow in the first quarter of 2009.  So far, there have been just 30 exits at just £221 million.  Exit value has been falling since the record year of 2006 when total value realised reached £26.9 billion.  Exits ended last year at just £9.8 billion from 324 deals.

Continuing, Marriott said: “There is a distinct sense of déjà vu about today’s data.  In the recession of the early 1990s private equity investment stalled in much the same way and in Quarter One of 1991 declined to just £447 million.  Receiverships also increased during this period – reaching 124 in 1991 – and it was only in the mid-1990s that the buy-out market entered a period of robust growth.  Conversely receivership as a source of buy-out deals peaked at 107 in 1991.”

“We are unlikely to see much in the way of market recovery in the next quarters.  Rather, the expectation is for the market to stabilise at a new lower level throughout this year.  When confidence and leverage return to the market we should see activity begin to increase, but the timing of this is by no means certain” Marriott concluded.

Other interesting findings in today’s data include:

• There have been just eight deals in the £10-100 million range in the first quarter of 2009. This is down from 39 in the same period in 2008.
  
  
• The average deal value this year is just £32 million, down from an average of £34 million in 2008 and well below the £69 million average set in 2007.
  
  
• Buy-out activity above £100 million has plummeted with a combined total of just five from the last two quarters, compared to 22 in the preceding six month period.
  
  
• The proportion of total M&A volume provided by buy-outs has remained relatively stable at around 50 per cent in recent years. In 2007 buy-out activity accounted for 63 per cent of value but fell sharply in 2008 to just 35 per cent.