Barbarians at the gate? Private equity bonanza fails to materialise
A wave of predicted private equity deals failed to rear its head last month as sticky inflation and more interest rate pain forced dealmakers to reconsider an offensive, according to a London investment bank.
The City had been braced for a wave of take-private deals in the Capital in 2023 as foreign buyers pounced on cheap valuations, pushed lower by a weak pound and the lingering effects of Brexit.
However, despite a number of bids for firms in the first five months of the year, the wave of takeovers has so far yet to come to a head. Bankers at Peel Hunt said the trend continued last month as longer rate pain keeps deal financing expensive.
“Notwithstanding expectations of a surge in take-private activity, traditional private equity buyers were absent during the month, mostly likely as they reassess the outlook for interest rates in the light of persisting inflation,” Peel Hunt said in a report.
“We note, however, that EQT and ADIA announced a firm offer for Dechra, albeit on reduced terms, following the month end.”
Swedish firm EQT and the Abu Dhabi Investment Authority struck a deal with pet drugmaker Dechra at the end of the month at a slashed valuation, after the pet pharmaceuticals firm issued a profit warning since the first offer.
Peel Hunt found that M&A activity across the market cooled last month with just six new offer periods began, down from 13 in April as sticky inflation concerns spooked investors.
Among the other deals to punctuate the lull were a £485m swoop on social housing real estate investment trust (REIT) Civitas by CK Asset Holdings, and a £198.6m deal for listed REIT CT Property Trust limited by FTSE 250 Londonmetric.