So what do you think if someone offers to buy a product off you for more than you thought it was worth? Do you say thank you very much? Or do you think, “maybe I was wrong, and the product is worth even more, so ‘no thank, you, I want more’ “? It appears that this is exactly the mentality of shareholders in some British companies.
According to research carried out by The Centre for Management Buy-Out Research, and sponsored by Deloitte and Barclays Private Equity, there has been a fall in the UK buyout market, with the value of the deals done falling from #128;19 billion in the first half of 2005 to #128;15 billion for the same period in 2006.
Tom Lamb, Co-Head of Barclays Private Equity, said that public to private buy-outs have “dried up, due to public company shareholders proving to be incredibly resilient to private equity advances.”
Mr Lamb said: “Private equity in the UK is a bit of a victim of its own success. In the UK investors now feel that a company must be undervalued if a private equity bidder shows an interest.”
Recently, Mr Lamb was quoted in the Times as saying: “As money has poured into private equity, people have been saying: ‘I know a company’s worth $80 a share, but under the circumstances we’re prepared to pay $90.’ But often somebody else has come in and paid $110.” This has led to a perception that companies can always receive a higher price, and it appears prices have been driven too high.
But while buyouts in the UK are falling, continental Europe has seen a strong upsurge. The same research found that the Continental European buy-out market reached #128;55.3 billion for the first half of 2006, an increase of 70 per cent on last year’s figures.
France is the most active market in terms of volume with 85 buy-outs just ahead of Germany with 76, although the German buy-out market is much more active than in previous years - 61 for the same period in 2005 and 121 for the whole year. Italy remains steady with 22 deals in the first half of 2006 compared to 23 in 2005.
In terms of value, France is also the largest market with #128;14.6 billion (predominantly accounted for by just one deal, the P2P of Danish firm TDC) followed by Denmark with #128;13 billion, the Netherlands with #128;12.2 billion and then Germany with #128;8.5bn. Italy coming in at #128;1.1bn is still doing well although figures suffer in comparison to 2005 which was an exceptional year recording a value of #128;17.5bn.
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