Survey shows number of MBOs is on the rise despite fall in total value

Management buyouts are accounting for some of the City's most substantial deals at the moment, says a survey published today by KPMG's private-equity group.

Transactions such as the buyouts of the health clubs groups Holmes Place and Fitness First, and the possible delisting of the department store group Debenhams, indicate a significant increase in the size of private-equity deals, KPMG says.

The firm said the increase in the levels of activity was not reflected in the number of MBOs which were actually completed in the three months to the end of June. Some 29 MBOs were completed in the second quarter, up slightly from 26 in the same period last year. However, the total value of the deals has fallen from £4.79bn in 2002 to £2.013bn this year.

Permira, the venture-capital group, is preparing a £1.5bn bid for Debenhams and the Fitness First board has raised £204m to take the business private. Both these deals are substantially larger than the £99m average value of private-equity transactions completed in the first half of this year.

Charles Milner, head of corporate finance at KPMG Private Equity, said: "Whilst the overall figures show continuing lower levels of completed deals to the end of June, this masks a significant increase in activity which we expect to come through in the second half of the year."

Private-equity groups had problems in some cases with the "pricing and the institutional appetite to accept offers" in the first part of the year.

"There has been recent evidence of institutional resistance to management-led offers for public companies," the report added.

While several big deals have been pushed through recently, these factors continue to be stumbling blocks, particularly because most private-equity deals value companies at a fraction of their price a few years ago.