UK private equity deals are down as firms seek bargains

New research shows that the UK’s closed private equity deal volume has dropped by 20% over the past 12 months, as companies hold cash to lower their valuations.

According to research from ADDX (a digital exchange for private market), the number of British companies that were taken over by private equity firms in the year to September fell to 440, down from 550 last year.

Only 80 deals were concluded in the UK in September and October, a decrease of 34% compared to the 121 acquisitions in the previous three-months and a drop of 42% compared to the 137 acquisitions in the third quarter.

This comes amid a wider slowdown in European deal closures, as transactions fell to 2,211 from 2,361 the previous year.

Despite falling valuations amid a difficult period on the markets, chiefs at ADDX say that there are still deals to be done across Europe as investors look for cheap business opportunities.

She said that some private equity funds had begun to halt deals as the economic cycle turns, and they are waiting for sellers’ expectations.

“With inflation hovering above 8 percent in much of Europe, and central banks tightening credit, funds can expect transaction valuations will decline.”

She said that investors are optimistic that the decline will continue, and that companies will see the same returns as the 2009 funds that purchased stakes in companies after the financial crisis.

Analysts at ADDX stated that the ability to acquire businesses with unexpectedly low values during economic stress is a key driver of higher returns once the economy recovers from its bottom.

Private foreign companies are looking to buy public companies at a bargain price in the UK.

Ted Baker is among those companies that will be chosen, while tech companies like Darktrace or Aveva have attracted the attention of foreign buyers. Although the Darktrace deal was cancelled, Schneider Electric, a French industrial group, is still looking to take over Aveva.