Buyout activity falls off sharply: Number of flotations likely to increase

MANAGEMENT buyout and buy-in activity suffered a sharp decline in the first six months of this year, to record the lowest first-half total since 1987, according to figures published yesterday.

However, the annual review from the Centre for Management Buyout Research shows that values in the third quarter are higher than in the same period last year, while a marked increase in propositions should feed through into completions in the final three months.

The centre at Nottingham University's school of management and finance - founded by Touche Ross, the accountants and management consultants, and Barclays Development Capital - also reports that this year's total of buyout flotations is likely to be the highest since 1988 as investors and management seek to take advantage of the opportunity offered by buoyant stock market conditions.

The 206 deals completed in the first six months of the year was 37 per cent lower than in the same period last year, while their aggregate market value of pounds 1.52bn was a tenth below. In the overall takeover market, the share of buyouts and buy- ins fell to below 50 per cent for the first time in two years.

In addition, there were significant changes in the sources of buyouts, with those from foreign parent companies being the only source to experience a rise in the number of deals completed. Companies in receivership accounted for a record fifth of buyouts, though the lower overall deal volume meant that the actual number fell.

Among the other changes are different financing structures, with the share of equity falling to below a third of financing value after a period of more conservative funding, and sharp falls in the number of investments by venture capitalists.