Appetite for company buyouts and stock market flotations returns

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The Independent Online

Stock market flotations and company buyouts are both on a rising trend after a prolonged period of subdued activity, according to research published today by PricewaterhouseCoopers and KPMG.

On the private equity front, the final quarter of 2003 saw the UK buyout market return to levels not seen for more than two years. Figures from KMPG show that transactions worth £6.8bn were completed between October and December last year. This is a 70 per cent improvement on the value of deals in the fourth quarter of 2002.

Over the year, 121 private equity deals were completed with a total value of £15.5bn, up 5 per cent on 2002. This turns around a two-year decline in the value of deals. Charles Milner, the head of corporate finance at KMPG's Private Equity Group, said: "The strong last quarter of 2003 marks a return of confidence in the buyout market. Confidence at the lower end of the market [deals valued under £150m] returned in the Spring. Activity at the larger end has been more patchy. It has taken longer for confidence to return but we are now again seeing activity across the board." The group predicts that 2004 will be another strong year for buyouts, particularly in the middle market.

Five of the deals in the past quarter took public companies into the hands of private equity firms, including Debenhams at £1.7bn. Taking public companies private is expected to become more difficult as stock markets improve. "With strength returning to the capital markets and increasingly involved institutional shareholders these transactions will remain challenging," Mr Milner said.

Improved stock market conditions are helping to boost IPO activity. Research from PwC shows a 76 per cent improvement in the number of floats in Europe in the fourth quarter.

The months of October to December last year also saw an increase in the value of IPOs compared with the same period in 2003, up 129 per cent to €2.5bn (£1.8bn). Three of the four largest listings were in London, including Vedanta, the mining group, at €730m, Alea, the reinsurer, at €238m and Center Parcs on the Alternative Investment Market at €3525m.

The AIM, a market for fledgling and smaller companies, has seen a high volume of activity this year. Of 44 IPOs in London, 39 were on AIM. Tom Troubridge, of PwC, said: "There has been a steady improvement ... during 2003 but we are not yet seeing the flood of IPOs across the European markets predicted by some commentators. However, the IPO market has ended the year on a strong note and is very much open for business."