Private equity buyouts of UK companies start year at highest level ever

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Stephen Schwarzman (right) was one of the co-founders of private equity giant Blackstone (Source: Getty)

Private equity buyouts of UK companies have surged to record the fastest start to a year since at least 2001 as investors look to put money to work.

Deal value to this point has increased by 73.3 per cent year-on-year, according to data company Mergermarket.

There have been 30 private equity buyouts in the first two months of the year, with a total value of £5.6bn – more than £2bn more than the same point last year.

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The massive boost was driven by private equity giant Blackstone’s £3.4bn acquisition of Aon’s benefits outsourcing division, which was announced in the middle of last month.

This also pushed up the average value of private equity deals in the UK to £372m, the highest point on Mergermarket record, in comparison to £254m during 2016.

Industry assets rose to almost $2.5 trillion (£2.04 trillion) in the middle of last year, according to Preqin, as large, long-term investors look for higher yields.

The pipeline of future activity also looks secure, with global dry powder levels – the amount of money not yet invested in a company – rising by 16 per cent in the six months to June 2016, Preqin reports.

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Katharine Dennys, research editor EMEA at Mergermarket said: “An estimated $800bn-worth of dry powder will sustain activity within the private equity space, keeping prices at a high level throughout 2017.”

The risk-on attitude in the world’s main markets has proved fertile ground for private equity deal volume, as the opportunity cost of sitting on money rises – particularly in a UK market which is around 18 per cent cheaper in dollar terms than the pre-referendum peak.

Dennys said: “For private equity practitioners, the cost of inactivity is far greater than the risks they are facing. As a result, dealmakers will find a way to navigate the political uncertainty in order to deploy their considerable funds.”