UK: A Market In Decline?

Last Updated: 18 January 2001
Article by Ian Gilbert

The economy is generally regarded as being in a pretty healthy state with a combination of steady growth and a low rate of inflation. Interest rates remain relatively low and are forecast, in the long term, to fall. The phenomenon has significantly depressed valuations of the companies in what is now deprecatingly called ‘the old economy’. Banks and venture capital companies are flush with cash and are apparently keen to invest. The only blot on the landscape (ignoring recent concerns about the effect of the Chancellor's spending plans) is the high pound. Therefore, management teams of strongly performing ‘old economy’ businesses could understandably believe that now is as good a time to do an MBO or MBI as there has ever been.

However, looking at recent statistics for MBO/MBI activity, the indicators suggest, rather surprisingly, that overall it is not such a good time. In 1999, only 31 MBO/MBI transactions in Yorkshire and Humberside were recorded by the Centre for Management Buyout Research compared with 66 in 1998. Although the figures for the first quarter of this year suggest record levels of activity, with 13 deals - valued at £528 million - being completed, closer inspection suggests something different. In the first quarter of this year three large public to privates (Waddingtons, Evans and Allied Textiles) were announced. Remove these from the statistics and the picture appears far less rosy.

Although the national trend for MBO/MBI activity in UK regions has generally been downwards, it is notable that the decline in Yorkshire and Humberside has been more pronounced. Some commentators seeking to identify a specific reason for this decline have attributed the fall to the departure of a number of leading deal-makers from the Leeds business community. Whilst, undoubtedly, Leeds have in recent years lost a number of talented individuals who could act as a catalyst to a deal, I think this view is overly simplistic in approach. What this view fails to recognise is, that in a relatively short space of time, the MBO/MBI market place has, and is continuing to, experience some significant structural changes.

The nature and level of activity on the Stock Exchange will always ultimately influence the MBO/MBI market place. The continuing lack of appetite amongst institutional investors in smaller to medium sized companies, particularly in the ‘old economy’ has largely removed a listing as an exit opportunity for a private equity house. This makes private equity investors more focused on the opportunities for and the likelihood of a trade sale and, by implication, more selective in the type of MBO/MBI that they are prepared to invest in.

The flight to the FTSE 100 has not been all bad news for the MBO/MBI market place as it has opened up public to privates. However, these transactions are by nature more complex and, as a number of institutions and professionals have found to their cost, considerably harder to complete. The public to private market is, however, finite and this means that the more obvious candidates have already had the rule run over them by a number of private equity houses. The limited market, coupled with the costs and the risks associated with such transactions, seems to dictate that private equity houses are likely either to gradually drift upmarket in terms of the value of the transactions they will pursue or seek the one off opportunities in sectors where they have specific expertise. A number of public to privates have, in addition, been able to exit the market on the back of debt simply because sentiment has swung so much against them.

Finally, the influence of the headlong pursuit of dot.coms and technology stocks over the last six to nine months with the perceived dramatic growth opportunities has also cast a shadow over traditional businesses. Investors are guided by sentiment and, if the institutions on the Stock Exchanges are turned off traditional businesses, this inevitably affects the willingness of private equity houses to invest in such businesses.

The enthusiasm of private equity houses for MBO/MBIs in the £10-£30 million bracket has been waning for sometime. As a consequence of this trend and the pursuit of dot.coms and high technology stocks the traditional regional market place has become like the Marie Celeste. It is therefore not surprising that we have experienced a fall in the level of activity.

You might in the past have seen the deal makers reversing this trend but even their position in the market place has changed. The major accountancy firms and those law firms that have gone ‘national’ are no longer as wedded to the performance of their region as once they were. With national reporting lines and responsibilities there is less interaction with their fellow ‘regional’ partners and as a consequence less cross-pollination of ideas and opportunities. In a buoyant corporate finance market where M&A activity has been strong, there is probably also less activity and, possibly, enthusiasm, within the professional community to invest time in creating deals.

The combination of a lack of investor interest and a lack of enthusiasm on the part of the professional community is a serious impediment for the market.

In the absence of specific encouragement, the MBO/MBI market is far more dependent on managers spotting the opportunity and being determined and ambitious enough to pursue that opportunity. However, we are also finding that there is far greater market concentration occurring in a wide range of sectors through the process euphemistically entitled ‘globalisation’. This has to an extent affected managers' confidence in their ability to go it alone, particularly with significant debt on board. This market concentration is also being fuelled by the e-commerce revolution which, despite its faltering steps at present, has resulted in almost every business questioning its ‘modus operandi’ and looking to the future with a degree of uncertainty. If you are an ambitious management team then in the current environment a well financed start up without historic baggage can be seen as an attractive opportunity.

So is the MBO/MBI market in terminal decline? Probably not, but what we are experiencing is a market reaching maturity.

MBOs and MBIs are no longer the only game in town for private equity houses, managers or professionals. There is now greater diversification in the corporate finance market place than there has perhaps been for 20 years and although MBOs and MBIs, whether in the form of public to private or private companies being sold, will continue to represent a significant market place I doubt it will ever be the dominant place that it was in the 1990s.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions