European Buyouts Power Ahead Boosted By Pass the Parcel Deals

European private equity buyouts continue to gather steam with activity fueled by a string of 'pass the parcel' deals in which private equity firms sell on to each other rather than trade buyers or to the public markets in an initial public offering, according to a study released Monday.

There were 125 buyouts with a total value of EUR8.6 billion in the second quarter marking an increase in volume for the fifth consecutive quarter, the Centre for Management Buyout Research, or CMBOR said, writing in Ernst & Young and Barclays Private Equity's market review.

Although somewhat lower than the total value of deals in the first quarter, which came in at EUR11.1 billion, value remains much stronger than two years ago and is even topping levels posted in the boom, Ernst & Young said.

"Buy-out transaction multiples have rebounded," said Joachim Spill, EMEIA transaction advisory services leader at Ernst & Young.

"In the first half of this year, the average price to earnings on larger European deals was 17.9x - which is actually higher than back in 2007 when the market was at its peak. This is interesting because in 2009, PE [private equity] multiples were barely double digits," he added.

The continued growth is being boosted by secondary buyouts where one private equity firm sells to another private equity firm, and even tertiary or quaternary buyouts, where the asset finds its way into the hands of a third or fourth consecutive buyout owner.

-By Marietta Cauchi, Dow Jones Newswires; [phone]; [e-mail]