Sharp decline in private equity deals

THE VALUE of private equity deals completed in Ireland in the first half of 2008 declined by 73 per cent to €73.5 million. This was down from €277 million in the first half of last year, according to figures from the Centre for Management Buy-out Research.

The significant drop in activity resulted in an average deal value of €14.7 million - the lowest since 1997.

Just five deals were completed in the first half of the year, compared with eight in the same period of 2007.

The value and number of deals fell for a second year in a row. The average value of the eight MBO deals conducted in the first half of 2007 was €34.6 million. This compares with an average value of €99.2 million for the 16 deals completed in the whole of 2006.

All deal values in the first half of this year were below the €50 million mark with four under the €25 million level. In comparison, two deals surpassed €100 million in 2007.

The decline in deals this year is due to the credit crunch, according to David O'Flanagan, head of Deloitte Corporate Finance. The Centre for Management Buy-out Research was founded by Barclays Private Equity and Deloitte.

"The credit crunch continues to impact on activity - and potential acquirers will want to see how the economy plays out over the coming year before committing to a deal," he said. "Also, some vendors may still be unwilling to budge on price, while acquirers are holding out for a bargain."

Mr O'Flanagan said the big international deals of recent years were unlikely in the near future.

"We are looking at another year of modest activity in the buyout market. I don't think there is any sign of the credit crunch abating and until that resolves itself, these large-scale buyouts, which are heavily leveraged, simply won't happen," he said.