Deal or no deal

by Kate Pritchard - Wednesday, 1st October 2008 -

Jon Moulton wasn’t exactly exaggerating when he told us the outlook for the private equity industry was gloomy.

“It’s not exactly a cheerful picture,” he told us yesterday. “Negative returns are the expectation at the moment. The number of sales has plummeted. Sellers haven’t got their minds around the fact that their businesses are worth 30 per cent less than last year.”

He’s not wrong. A paltry £16.8bn of deals were completed in the first nine months of this year, compared to £40.2bn in the same period last year, according to figures from the Centre for Management Buy-out Research (CMBOR).

“What we are seeing now is the market reaching a more settled level, albeit one that clearly reflects the current poor economic environment,” says Christiian Marriott, director at Barclays Private Equity. “The highest first quarter on record – in part driven by changes to capital gains tax – has been followed by a slowdown to £5bn in the second quarter and a further fall to £4.3bn in quarter three.

“It remains to be seen what happens in the rest of 2008 and the degree to which the market turmoil in September affects buy-out activity in the fourth quarter.”

Looks like the market is levelling out from “this mad financial Disneyworld we have been living in”. (Sorry, Sir Alan Sugar, we couldn’t help nicking your quote.)