Value of PE ‘take private’ deals in the UK more than trebles to £14.0bn in a year

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The value of private equity (PE) deals taking UK-listed companies private has more than trebled to £14bn in 2018/19, up from £3.8bn the previous year, says the accountancy and business advisory firm BDO LLP.

The number of ‘take private deals’ involving private equity firms has risen over the past few years in the US and globally. Activity has historically been more restrained in the UK but experts at BDO say there are considerable opportunities on the horizon for UK PE firms with funds to deploy.

BDO says that depressed valuations on an underperforming UK stock market mean UK companies now look very attractively-priced to many PE funds.

Meanwhile, an active M&A market for UK private companies has pushed up prices in trade deals as demand for quality assets outstrips supply.

BDO’s research shows that the valuation premium that normally exists for listed companies when compared to privately-owned companies is narrowing. While the valuations of the FTSE All-Share has increased 3% from 12.4X EBITDA in Q3 2015 to 12.8X in Q2 2019 in the last four years, the price at which private company deals have been transacted has increased by 10% from 9.5X EBITDA to 10.4X in the same period.

Jamie Austin, Head of Private Equity at BDO, says that despite the rise in the total value of take private deals, the surprise is that there aren’t more of these deals taking place. Only eight PE-backed take private deals were announced in the UK in last 12 months.

“Considering the attractive valuation of so many UK listed companies combined with the scarcity of high-quality private assets for sale in the market, there ought to be more take private transactions,” says Austin.

“Some PE firms are put off by the extra compliance burden of acquiring a listed company, which means dealing with the Takeover Code and its strict timetable, however these can be relatively straightforward obstacles to master.

“For management teams, the immediate reduction in regulatory, compliance and reporting burdens also makes public-to-private transactions an attractive proposition.”

Austin adds: “Despite the looming shadow of Brexit, there doesn’t seem any immediate concerns for money to stop flooding into PE funds.

“As long as the listed companies remain attractively priced compared to private companies, I would expect to see first time acquirers of listed companies come back for more. The ‘take private’ market is set to become an increasingly popular one for PE firms to play in.”