Returns-seeking replicas

Private equity ‘copycats’ are providing UK buyout firms with some serious competition.

It's been said that one of the surest signs of success is emulation. In the case of the UK buyout industry, the returns achieved by the industry seem to be beckoning other types of investors to follow in GPs' wake.

A recent study by the Centre for Management Buy-out Research (CMBOR), a joint venture between Barclays Private Equity and Deloitte at Nottingham University Business School, shows that new entrants to the market are providing UK private equity firms with a new source of competition for larger deals.

?The private equity industry is attracting a number of new kids on the block who believe that they will be able to make the same returns,? said Barclays Private Equity co-head Tom Lamb in a press statement. ?These new entrants are able to gain a foothold because there are virtually no barriers to entry provided they can persuade the banks to lend them shed loads of money.?

In fact, with the help of ?shed loads? of money, private equity ?copycats? made their mark in the UK early on this year, having led 33 percent of £100 million-plus transactions taking place in the market in the first quarter of 2006, according to CMBOR. This figure is a significant increase over the 8 percent level of participation last year, although granted, it remains to be seen whether the participation of copycats in transactions in the rest of 2006 will match the pace of the first quarter.

In fact, many of the firms identified by the CMBOR as copycats would argue vociferously that they are private equity firms. However, the study confirms the trend of financial buyers with nonorthodox structures competing for deals with traditionally structured firms.

Among such transactions that have taken place since 2005 are the following:

  • ? January 2005: Cerberus and Fortress' £200m acquisition of Box-clever and Endeva
  • ? May 2005: Dubai International's £800m buyout of Tussauds
  • ? June 2005: The Glazer Family's £780m take-private of Manchester United
  • ? July 2005: Macquarie's £166m acquisition of BBC Broadcast
  • ? January 2006: Och-Ziff's £404m take-private of Peacock Group
  • ? February 2006: Dubai International's £700m buyout of Doncasters
  • ? March 2006: Isthimar's £162m buyout of Inchcape Shipping Services
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