Brit dealmaking comes to life in summer blitz

Michael Bow
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SALES of British-based companies owned by UK financial sponsors have hit a five-year high after a bumper crop of summer deals, newly published figures show.

The August surge in deal making, led by CVC Capital Partners’ £750m deal for insurer Domestic & General, has driven domestic UK company exit values to £2bn for the third quarter so far, and more sales are set to come.

It is the most valuable period for UK exits since the third quarter of 2008 – the quarter prior to the collapse of US bank Lehman Brothers – and is out of step with the traditionally quiet M&A environment in July and August.

The figures are a welcome sign of activity for the UK economy, which has started to show early signs of recovery after two quarters of consecutive growth this year.

The statistics, from data provider Mergermarket, show eight of the top ten European exits by value in August were sales by UK financial sponsors. Of the top ten companies sold, six were British-based businesses.

Deals driving the British dominance includes Terra Firma’s £700m sale of Phoenix Natural Gas, Langholm Capital’s £100m sell-off of Tyrrells Potato Crisps and Alchemy Partners’ £266m exit of insurance group Cathedral Capital.

And the UK’s strong showing is not just confined to selling British companies – domestic financial sponsors buying UK firms via an exit is also nearly 40 per cent higher than a year ago.

Financial sponsors, traditionally private equity firms, invest in companies with the hope of selling them at a profit. These so-called exits deliver a return for these investors.