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The landscape for private equity led buyouts is clearly barren. Only five deals have been announced this quarter to date, which is less than 10% of completions during the same period in 2008. The 1st quarter of 2009 didn’t look much better either, with only 13 completed compared to 63 last year.
Obviously the financing of deals in terms of debt remains a stumbling block or at least the price of debt finance makes it prohibitive. Vendor price expectations are still significantly higher than that of buyers. The appetite for backing relatively high risk transitions in this climate remains limited.
However, on the positive side we have seen Lloyds Development Capital complete a number of deals this year and a key client of Interim Partners, Endless llp, recently completed the acquisition of British Bookshops and Stationers plc with the aid of an Interim CEO provided by our Private Equity Practice (announced in Retail Week http://www.retail-week.com/retail-sectors/entertainment/books/ex-whsmith-man-to-run-british-bookshops-and-stationers/5002884.article )
Other bright spots have been a number of opportunities instigated by the Business Support teams within the Banks and recovery practices within the leading advisory and accountancy firms. These roles have mainly being focused around balance sheet restructuring, turnaround advisory, and Non-Executive Directorships. I still feel we are a little way from seeing the real medium to long term turnaround mandates that would create opportunities for Interim Executives across the spectrum, but seeing the banks acting on this tentative basis is still fantastic news.
Also, if we are almost at the point when the worst is over (say it quietly) perhaps these and many other opportunities will start to filter through quicker and that may also provide a catalyst for more M&A activity. Going forward one must expect the environment to become more fertile as there will be many opportunities for investors to commit some of the cash piles that have built up in the last six months. In Britain alone there is circa £90bn waiting in the war chest. There is no question 2009 has been a tough year for the buy out community, banks, and management teams of leveraged buyouts, but hopefully the summer will provide us with some momentum going in to the last quarter of the year.
Please feel free to leave your comments regarding the current M&A and Private Equity market conditions and don’t hesitate to contact me if you would like to discuss any of the issues raised here or in previous entries. Indeed I am always keen to hear from Executives operating in this space either directly or indirectly.
