Public to private buyout deals to re-emerge

By Simon Meads

LONDON (Reuters) - A dearth of capital provided by banks may drive public companies into the arms of cash-rich private equity firms and could help kick-start the moribund market for public-to-private buyouts.

There have been some signs of revival in the market that has been virtually shut for more than a year, private equity companies say, as institutional investors seek a way out of companies whose share prices have dropped.

There has been a pick-up in business in just the last couple of weeks, with two public-to-private deals going into the due diligence phase, said private equity partner Andrew Roberts at law firm Travers Smith.

A slow drip-feed of liquidity back into the system next year could give more impetus to the market for mergers and acquisitions (M&A), he said. But he refused to comment on the deals under question.

"It's still going to be relatively small deals in the hundreds of millions rather than the billions," he said.

In the first nine months of 2008, there were only 15 public-to-private buy-outs in the United Kingdom, according to figures from the Centre for Management Buyout Research, with the 2 billion pound buyout of EMAP the largest of only three buyouts worth more than 1 billion pounds.

This contrasts with the 24 public to private deals made last year, including the European high watermark deal - the 11.1 billion pound KKR-backed takeover of Alliance Boots.

And there is a precedent for a rise in this type of deal after a sharp fall in asset values. Towards the end of the dotcom boom, there were 46 public-to-private deals in 1999 and 42 in 2000, accounting for 27.6 percent and 39.1 percent of total buyout deal value respectively. That total includes other deals between private equity firms and buyouts by privately-held companies.