Support Services see M&A value balloon amid increasing
competition between private equity and trade bidders
In Q1 of 2010, the total value of private equity investments in
Support Services amounted to £1.1 billion, which is already equal
to the total value recorded in the whole of 2009, according to a
Grant Thornton report called 'Where is the Smart Money Going in
Support Services?' Competition is set to intensify in this sector
in the coming months according to the corresponding survey of 40
leading private equity investors with experience of investing in
Support Service providers.
80% of the financial sponsors that back
Support Services expect to see an increase in competition from
trade bidders, while 72% expect the level of private equity
investment in the sector to increase, according to the report which
will be presented on 28 April.
"Although private equity houses have been
investing in Support Service providers for more than a decade, we
expect to see much fiercer competition in future sales processes.
Both financial sponsors and bankers feel very comfortable investing
in support services firms that demonstrate robust contracts and
repeat business," commented David Ascott, Private Equity Partner at
Grant Thornton.
Almost all respondents to the survey (97%)
said that they planned to make an investment in Support Services
over the coming 12 months.
In 2009, Support Services attracted 37 private
equity transactions with a total value of £1.1 billion. That value
is almost eight times lower than in 2008, when Support Services
generated 120 private equity deals with a total value of £8.4
billion.
In Q1 2010, the strong recovery in the value
of private equity investments in Support Services is not down to
exceptionally large individual transactions, as the largest
transaction was Advent's £274 million takeover of Xafinity.
The most attractive subsectors within Support
Services are Business Process Outsourcing (BPO), Operational
Support and Facilities Management, which were selected by 73%, 52%
and 33% of respondents respectively.
"The outsourcing drive by both financial
service providers and public service providers is attracting ever
more investors. It is therefore not surprising that our survey
identified Business Process Outsourcing as the most attractive
subsector," explained Ascott.
Within BPO, respondents identified payment
services, IT services, as well as HR and payroll as particularly
attractive.
ENDS
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contact:
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Thornton UK LLP, 020 7728 2048
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