Big buyout houses hunt out smaller deals - study

LONDON: Big buyout firms are dipping into the mid-market to find new European deals, according to research from M&A adviser DC Advisory Partners, after the credit crisis choked off their supply of credit.

About half of new deals struck by the big firms since the credit crisis were worth under 500 million pounds ($794.2 million), up from 29 per cent previously, the research showed.

DC Advisory, formerly Close Brothers Corporate Finance, analysed 423 deals from 16 large-cap buyout houses, including Blackstone, CVC, KKR, Permira and TPG between 2005 and 2010.

The research separated out new deals from bolt-on transactions to build up portfolio companies.

TPG recently agreed to pay 300 million pounds for British fashion chain Republic and Permira last month sealed a deal for Creganna-Tactx Medical, valuing the Irish medical device maker at 220 million euros ($297 million).

"Many of these large cap private equity groups originate from the mid-market and so are going back to valuation territory they know well," said Simon Tilley, head of DC's Financial Sponsors Coverage Group.

Stripping out large one-off deals that would skew the numbers, DC found the average value of deals by large cap private equity firms fell to 250 million pounds in 2010 from 500 million pounds in 2008.

Private equity firms are fighting fiercely over deals, frequently buying assets from each other, as they look to deploy hundreds of millions of dollars pledged by pension funds and other investors at the height of the buyouts boom.

This competition is holding up prices for good assets, Tilley said.

"Competition is hotting up and value expectations for the best, and particularly the most scaleable assets, remains high. We expect this trend to accelerate in 2011," he said.