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EquityFC Blog
In for the long haul | 1 December 2009
File it under "no surprises": Q3 2009 has been one of the worst quarters on record for buyouts. So says the Centre for Management Buy Out research (CMBOR) in its most recent survey. According to Nottingham University fellow Rod Ball (a researcher at CMBOR): "In terms of the number of deals, we’re going back to mid-1980 levels; in terms of deal value, we’re back in the mid-1990s." Deal volume has plummeted from almost 700 in 2008 to fewer than 300 in the first nine months of 2009.
Is there any good news in the numbers? Well, secondary buy-outs have plummeted as PE firms play cagey with each other in the absence of debt to justify deal mechanics. I think that's broadly good - SBOs do skew the market a bit and can often come across as being justified by financial clout rather than operational excellence.
More interestingly, two-thirds of buyouts so far this year have been under £10m. That is very good: it shows that smaller and potentially high growth companies are still in vogue - and they make the best businesses for broad-minded FCs and FDs, too.
The decline in deal activity is forcing many PE firms to think long-term - which is also good for smart financial managers. Lots of other people think so, too. When PE firms go long, they look for operational gearing, not financial. That means a more interesting and creative role for the finance function, a better shot at job security and - perhaps best of all - a chance to learn a huge amount from the operational experts that the PE firm will wheel in to help effect performance improvements.
Yes, your shares might gather a bit more dust on the shelf. But when they pay out, it'll be a much sweeter taste in your mouth - and you'll be more versatile as an FD to boot.