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Buy-out rush to avoid taxman

By Paul Driscoll on March 17 2008

Management buy-out value in the UK will top £5 billion in Q1, according to research published today.

The findings from the Centre for Management Buy-Out Research (CMBOR) revealed that £4.6 billion has been generated so far this year. The activity is indicative of the strong buyers’ market fuelled by owners selling their firms before next month’s jump from ten per cent to 18 per cent in capital gains tax.

Barclays Private Equity co-head, Tom Lamb, said: “After the 60 per cent decline in buy-out activity in Q4 2007, these numbers are relatively encouraging.

“Although the first quarter is traditionally a quiet part of the year, UK buy-out activity so far in 2008 compares well with prior years. This is in part driven by vendors rushing to complete deals before the end of CGT taper relief at the end of the tax year.”

Deloitte Corporate Finance partner, Mark Pacitti, commented: “A shuffling of the industry sector order is indicative of the wider change in the economy. In recent years, retail, leisure and food & drink sectors have driven deal flow, reflecting buoyant consumer confidence.

“In 2007 these consumer sectors accounted for 20 per cent of buy-out values (40 per cent including Alliance Boots). So far in 2008, consumer deals have fallen to less than five per cent of total deal value. The top performing sectors in Q1 2008 are business services (30 per cent), manufacturing (21 per cent) and TMT (18 per cent).”

Buy-outs in brief:

Q1 2008 has so far seen four deals over £250 million, three of which were over £500 million, but no £1 billion-plus deals.

In contrast deals, between £10 million and £250 million provided around half of the total value.

Secondary buy-outs and public-to-private deals remain the largest sources of buy-outs by value, respectively at 38 per cent and 41 per cent of total activity.

The Centre for Management Buy-out Research (CMBOR) was founded by Barclays Private Equity and Deloitte at Nottingham University Business School in 1986.

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