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Recent research by law firm Mourant Ozannes revealed that 69% of UK general partners and half of EU27 GPs deferred fund launches following the referendum result. With good cause. Almost half of private equity professionals polled predicted that the UK’s decision to leave the EU will decrease PE investment in European companies, while a third believed that it will decrease investment in UK companies.
That may be the gloomy prognosis, but not every UK LBO prospect is the same. Firms in sectors that are deemed to be ‘Brexit-proof’ are receiving a rapturous reception from the market, while those most exposed to the impacts of the EU exit will be shunned.
Look no further than the recent sale of UK business Independent Vetcare by Summit Partners at the end of last year. The firm, which was established in 2011, is the largest privately owned vet services platform in the UK. It is deemed immune from Brexit and therefore attracted aggressive bidding from, among others, Bain Capital, EQT and Nordic Capital.
Intense
Sources away from the deal suggest that competition was so intense that the premium reached was eventually in the high teens (the final figure paid remains confidential). The firm was bought by Swedish PE fund EQT.
A UK business in a more exposed sector might have received a very different reception. In October last year UK telecoms firm Daisy, which is minority owned by Oakley Capital, was forced to abandon a £385 million five-year high yield bond when investors demanded more than 8.5% for the trade.
The UK market is, therefore, expected to bifurcate. The amount of money chasing these assets means, however, that failure for the Brexit exposed will not always be the case: Just one month after abandoning its bond deal Daisy placed a £164.6 million PIK loan with Ares Capital.