The private equity market has seen a sharp upturn in deals this year, according to SVG Capital, the listed company that is one of the main investors in the sector alongside the likes of Permira and Cinven.
“There are definitely more deals going on out there,” its chief executive, Lynn Fordham, said. “It has quietened down since July but that’s just the holiday factor, with more to come.”
SVG benefited from the increasing activity, cashing in shares in the fashion group Hugo Boss and the AA owner Acromas to raise a total of £209m. But at the same time it has increased its spending, with an outlay of almost £150m on 14 new investments.
Ms Fordham said: “We are net divestors and I am happy with that. Prices and leverage have been improving, which means we have been divesting on quite high multiples and investing on lower ones.”
She said there was particularly strong activity in the healthcare, telecoms, technology and media sectors. “We are generally involved in larger buyouts and are seeing a mixture of trade sales, carve-outs from bigger businesses and some private equity flips.”
SVG has now taken itself from being a co-investor purely alongside Permira to join in with Cinven, CDR and, most recently, CCMP, which specialises in mid-cap and growth investments in North America and Europe.
Over the past five years SVG’s value has risen by 213 per cent. In the first six months of the year, net asset value climbed 4 per cent to 525p a share, although total returns were down 6.9 per cent as the portfolio was hit by the strength of the pound against some of its European investments.
Ms Fordham said: “We remain positive about the long-term outlook for private equity, albeit we are cautious about pricing and leverage levels in certain areas of the market currently.”
She said that newer investments – those made in the aftermath of a shareholder revolt in 2012 – were a growing part of the group’s portfolio. SVG has net cash and intends to return a further £100m to shareholders.
SVG shares rose 5.9p to 427.3p. That is still a 19 per cent discount to net asset value, which James Glass, an analyst at the broker Numis, believes is too great. He said: “I see this as too wide given the greater visibility of the portfolio under the new strategy, the continued returns of capital, and current portfolio growth prospects.”
During the six months the best-performing investments were SVG’s five largest holdings, which together represent 57 per cent of its total assets. The star was the semi-conductor maker Freescale, which gained £24.5m in value largely thanks to its successful flotation in the US. Hugo Boss continued its growth and gained £9.2m in value.