Just when you assumed overpricing couldn’t increase, PE ups the ante, Dechert partners argue

BVWire–UKIssue #37-1
April 5, 2022

Dechert is involved in many of the largest UK deals, so it’s worth listening when four of their leading finance partners (Jonathan Angell, John Markland, Daniel Hawthorne, and Thiha Tun) comment on a new trend. In a recent article for Lexology, the four imply that PE pricing, driven by continued cheap debt, has finally priced out the rest of the market. That’s certainly the case in the three largest recent transactions in the UK.

The authors refer to the two largest recent transactions in the UK as evidence for their claim:

  1. The £6.7 billion all-cash offer by a consortium of PE funds, led by Fortress, for WM Morrison Supermarkets PLC. “This sequence (including G4S, John Laing Group, TalkTalk, and Sanne Group) has caused some (politicians and trade unions being prime examples) to label the current market as ‘UK for sale,’” the authors say; and
  2. The sale by Cerberus Capital Management of Covis Pharma, a global specialty pharmaceutical company (and, therefore, a large, cross-border transaction), to Apollo Global Management Inc.

“There has been competition on PE exits from rival potential buyers, both trade and PE, with PE firms frequently willing to increase their pricing to match or outbid trade, or (at least) to compete aggressively on price, taking advantage of both the equity funds at their disposal and the favourable debt markets,” say the Dechert partners.

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