Buyouts increase tenfold in five years

Aggressive private equity houses have bolstered the volume of mergers and acquisitions in 2006 to a record high.

Buyouts in 2006 have totalled $719 billion (€546.6 billion) and contributed almost twenty percent to all mergers and acquisitions this year, according to Dealogic, a data supplier.  The volume of buyouts in 2001 was just $73.1 billion.  Overall, mergers and acquisitions totalled $3,880 billion, compared to $1,749.7 billion five years ago.

Buyouts totalled $719 this year

Buyout firms made up 24 percent of all bids in the last three months at $274 billion.

The number of buyout deals hit 31,191 this year, an approximately 16 percent increase on 2001.

In the UK alone buyouts and buyins totalled £24.8 billion (€37 billion;$48.7 billion) this year, exceeding the total in 2005 of £24.1 billion, according to figures from Nottingham University’s Centre for Management Buyout Research.

Jody Drulard, managing director of Dealogic, said the surge in buyout activity has come from “deep credit markets”.

Drulard said: “The difference now is that we have a deeper and more multi-dimensional credit market.  Five years ago equity sponsors held more than 35 percent of the capital structure in a typical leveraged buyout, when now it’s more like 20 percent.  The leverage was simple, you would have a high yield bond or bank debt but now they are putting in less cash and more leverage, and different types of leverage, three or four different flavours of bank lending.”

When you see private equity making aggressive moves in your space…it makes you move rapidly.

Jody Drulard, managing direcor, Dealogic

Drulard said firms were for the first time unconstrained by sector.

“It’s never been as widespread as the buyout cycle in history when it’s hitting every sector.  It’s universal.  The last boom consolidated in technology and telecoms.”

He said that the increase of private equity would force other investors to move faster.

“When you see private equity coming in and making aggressive moves in your space, if your sector is consolidating or doing things that have not been done before, it makes you move rapidly,” he said.