Tuesday 1st July 2008
Foreign investors take bigger UK stake
Overseas private equity firms did a record 57 buy-out deals in the UK last year, worth some £18 billion. It was the fifth consecutive year of growth in the number of foreign-backed buy-outs, according to data from the Centre for Management Buy-out Research (CMBOR).
Over the past five years the number of buy-outs backed by non-UK investors has more than doubled, while buy-outs backed by domestic firms remain flat at around 170 over the same period (and have halved since their peak in 1997).
Foreign firms are likely to back bigger deals, with an average transaction value of more than £300 million compared to less than half that figure for UK-backed buy-outs. They also look for a faster exit, with a mean holding period of around four years compared with five and a half for deals involving domestic investors.
Mike Wright, director of CMBOR, says that over the past 20 years the presence of overseas private equity firms in the UK has corresponded with peaks in market activity and valuations. However, he contends that the foreign firms have been following, rather than driving, a buy-out boom in the UK.
He adds: ‘The majority of non-UK investors come from the US, which suggests that the UK is being used as a bridging point to enter the European market.’
The UK now accounts for 58 per cent of the value of all US-backed private equity buy-outs, compared to 24 per cent five years ago, the study shows.
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