Private Equity Firms Are Done Waiting for Brexit
Private equity firms scoping out opportunities in the U.K. are fed up with waiting for Brexit. They want their deals now.
(Bloomberg) -- Private equity firms scoping out opportunities in the U.K. are fed up with waiting for Brexit. They want their deals now.
June was the busiest month for private equity buyouts of publicly traded U.K. companies in more than a decade, with $9.8 billion of announced deals, according to data compiled by Bloomberg. That followed a nine-month dry spell where only one major transaction was announced.
Blackstone Group LP and a group of investors agreed to take over Merlin Entertainments Plc on June 28 in a deal valuing the Legoland parks operator at 4.8 billion pounds ($6 billion). That was two days after TDR Capital agreed to buy Webuyanycar.com owner BCA Marketplace Plc.
Private equity takeovers like these haven’t been so active since November 2007, when the volume hit $10.3 billion, the data show. There’s likely more to come, with stocks hitting bargain prices. The FTSE All Share Index is down 3.5% in the 12 months through the end of June, and nearly 30 companies have lost at least half their value over the period.
Several London dealmakers from some of the top investment banks said they expect U.K. take-private deals to account for the bulk of their time in the coming months, with one saying his firm is working on roughly a dozen potential transactions. Brexit-related risks are often priced in, and take-private deals are a way for funds to put a lot of capital to work at one time, said Kiran Sharma, a partner at Ropes & Gray.
“The deals we are seeing are a result of that momentum that has been building,” Sharma said by phone Tuesday. “Private equity firms are also much more motivated to look at the public markets for deals given how overvalued the private markets are.”
Buyout firms, sitting on $1.1 trillion of uninvested capital, are increasingly competing against each other for assets -- from Nestle SA’s $10 billion skin-care divestment to Bayer AG’s plans to sell its animal-health business. The U.K. government has also been working to soothe dealmakers’ concerns about Brexit, with International Trade Secretary Liam Fox meeting a dozen top private equity executives in December.
Still, it remains to be seen how successful private equity will be in profiting from bets on Brexit bargains. Even the U.K. market, which is mired in uncertainty surrounding plans to leave the European Union later this year, is incredibly competitive -- take Apollo Global Management’s months-long pursuit of RPC Group Plc, which failed when Berry Global Group Inc. came in at the last minute with a higher offer.
--With assistance from Jan-Henrik Förster.
To contact the reporters on this story: Dinesh Nair in London at dnair5@bloomberg.net;Sarah Syed in London at ssyed35@bloomberg.net
To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, Ben Scent, Colin Keatinge
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