08 March 2012

Buy & Build activity in Europe significantly weaker in H2 2011

Silverfleet Capital, in conjunction with mergermarket, has published the findings of its 2011 Buy & Build Monitor which show a significant slowdown in Buy & Build activity.

Headline Findings

  1. While overall 2011 saw Buy & Build activity increase both in volume and value terms, the number of add-on transactions decreased considerably during the second half of the year slumping to levels last seen at the end of 2009
  2. 2011 saw the highest number of add-ons undertaken by private equity-backed portfolio companies since 2008, at 364 (versus 335 in 2010). However, despite a strong start to the year, with 210 add-ons undertaken in H1, the second half of the year saw activity levels decline significantly, with only 154 add-ons undertaken in H2
  3. In H1 the average value of add-ons was £70 million, which was the highest since we began tracking Buy & Build activity on a quarterly basis in Q1 2008, however in H2 this figure fell to £57 million, with Q4 seeing an average add-on value of only £34 million


Commenting on the findings, Neil MacDougall, Managing Partner of Silverfleet Capital said: “The downward trend in Buy & Build activity we first observed in Q3 continued in Q4 and there is now clear empirical evidence of the negative impact that the European sovereign debt crisis has had. We can only speculate on what the exact causes are, but we would expect that they include a drop in overall business confidence as well as the much tougher market for bank financing.”

“While Buy & Build strategies have been more difficult for European companies to pursue in recent months, private equity portfolio companies have of course several other ways to create value. For example, OFFICE, a shoe retail company which we acquired in December 2010, has continued rolling-out into new locations. In 2011 the company opened 8 new stores and 8 new concessions which on top of strong like-for-like growth contributed to a very healthy uplift in profitability.”

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