The number of failed buy-out attempts by private equity houses is rising, and banks unwillingness to back these mega-deals is being felt in the Gulf.
The value of failed buy-out attempts by private equity houses has risen to a massive US$202bn, according to London-based financial newspaper, The Financial Times. That figure is more than twice the value of failed deals recorded for the same period last year.
“Globally the large deals are not going to be happening in the foreseeable future because the leverage market has dried up,” Mohammed Chowdhury, executive director at Bahrain-based private equity house Arcapita, told Arabian Business.
The news of failed bids comes in the same week that Delta Two, the private equity vehicle backed by the Qatari government, pulled out of its long-running attempt to acquire British supermarket chain, J Sainsbury’s.
Delta Two, steered in part by Qatari prime minister Sheikh Hamad bin Jassim al-Thani, cited the downturn in the world’s credit markets as one of the reasons for the fund’s decision to withdraw its US$22.1bn offer. The board of Sainsbury’s was also demanding a further US$1bn in equity to inject into the company’s pension scheme and for working capital needs.
Delta Two is not alone in its decision to quit negotiations over potential acquisitions though. Since the onset of the credit squeeze, 76 deals have been abandoned according to Dealogic, a provider of global banking analysis.
These include an earlier bid for Sainsbury’s by London-based firm CVC Capital Partners.
In comparison there were 55 failed private equity bids worth US$98.9bn recorded in the previous period.
But it’s not all bad news for regional investment houses. Commenting on the current situation in the world’s financial markets Chowdhury said, “this correction that has happened has been a good thing for middle market operators such as Arcapita.” He added, “it is going to be better for investors because we can make investments at better valuations which make economic sense which wasn’t the case six months ago.”
Elsewhere some of the world’s biggest private equity players are still able to raise some funds. The US’s Carlyle Group has mustered US$1.5bn to fund infrastructure investments in the US and Canada.
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