Private equity investment buy-outs grew by a quarter in the three months to September to almost £600m, a new report has revealed.
Data from the quarterly trend analysis of private equity transaction found that 12 companies raised an estimated £590m of buy-out funding during the three month period, compared to 15 transactions and £474m of funding in the previous quarter.
According to Cass Business School and Lyceum Capital, who conducted the research, this growth indicates returning confidence amongst British businesses following the recession. The average deal value rose to £49.1m, up from £36.9m in the previous quarter.
Scott Moeller, director of the M&A Research Centre at Cass Business School, said: “There is still a fragility to the market but this does feel like a consistent and predictable trend with the amount of investment, and to a certain extent exit activity, gradually returning towards a more normal and sustainable level.
“We will need to be watching closely over the next several quarters for continued strength in this lower-to-mid-market sector that has traditionally been one of the strongest sectors for private equity activity.”
Furthermore, the report provides further evidence that business owners, many of whom scrapped plans during the downturn, are returning to the market to secure growth capital for expansion. The figures also contrast with official data from the Bank of England, which shows that traditional bank lending to small firms is falling.
Andrew Aylwin, partner at Lyceum Capital, commented: “Given the government’s emphasis on a private sector-led recovery, and our own experience suggesting there’s a higher volume of companies progressing through the diligence process, we wouldn’t be surprised to see private equity investment levels continue on their upward trend over the coming three months, and into 2011.”
© Crimson Business Ltd