The value of private equity (PE) deals taking UK-listed companies private has more than trebled over the past year, as the valuation premium of listed companies compared to private firms narrows.
The total valuation of deals taking UK-listed firms off the stock market more than trebled in 2018/19 to £14bn, according to new research by accountancy firm BDO. The figure represents a 278 per cent increase on the previous year’s total of £3.7bn.
The firm said depressed valuations on the UK’s relatively underperforming stock market was helping to make listed UK firms more attractive to PE funds.
There have been a string of high-profile “take private” deals targeting UK firms in recent months, including the £4.8bn takeover of Merlin entertainments by the Danish owners of Lego, private equity firm Blackstone, and the Canada Pension Plan Investment Board.
The government intervened in the £4bn takeover of defence giant Cobham by US private equity firm Advent International last month on the grounds of national security. The Competition and Markets Authority is investigating the takeover, and will report its findings by 29 October.
Despite the jump in overall deal value, BDO’s private equity head Jamie Austin said it was surprising there were not more “take private” deals taking place. Just eight such PE-backed deals have been announced in the UK over the past 12 months.
“Considering the attractive valuation of so many UK listed companies combined with the scarcity of high-quality private assets for sale in the market, there ought to be more take private transactions,” Austin said.
“As long as the listed companies remain attractively priced compared to private companies, I would expect to see first time acquirers of listed companies come back for more,” he added. “The ‘take private’ market is set to become an increasingly popular one for PE firms to play in.”