What Are The Most Common Private Equity Deals In The UK?
Explanation
• Leveraged Buyouts (LBOs)
LBOs are the most common form of PE transactions in the UK. These deals usually involve the acquisition of a company via a share purchase, although asset acquisitions also occur.
A significant portion of the purchase price is typically funded through debt, which is later serviced by the acquired business’s cash flows. LBOs often aim to improve operational performance and generate returns through eventual resale or flotation.
• Take-Private Transactions
In these deals, PE firms acquire publicly listed companies and remove them from the stock exchange. This structure allows investors to implement strategic changes more freely, away from the scrutiny and reporting requirements of public markets.
Between 2020 and 2022, take-private activity surged, reflecting both the availability of dry powder in the market and the perceived undervaluation of listed companies. PE firms were also willing to pay premiums for these deals, anticipating post-acquisition value creation.
• Flotations (IPO Exits)
Although less frequent as an entry route, a flotation—or initial public offering (IPO)—is often used by PE firms as an exit strategy. It allows them to realise returns by selling shares of the portfolio company to public investors.
• Bolt-On Transactions
Bolt-ons involve acquiring smaller companies to integrate into an existing portfolio company. These add-on deals aim to expand market share, geographic reach, product lines, or operational capabilities.
They are particularly common in platform-building strategies and can provide rapid growth with relatively lower transaction risk.
• Club Deals
A notable trend during 2020–2022 was the rise in club deals—transactions where multiple PE firms join forces to acquire a larger target.
This structure allows firms to pool resources, share risk, and take on more complex or capital-intensive deals than they might alone.
Market Trends
While 2020 to 2022 saw a flurry of PE activity—including take-privates and club deals—2023 has marked a slowdown in PE-led M&A transactions.
This reflects broader macroeconomic headwinds such as high inflation, tighter debt markets, and reduced revenues across various sectors.
Despite the slowdown, the UK remains a key hub for PE investment, with strong fundamentals and a diverse range of deal structures continuing to drive long-term interest from both domestic and global investors.
View More Definitions & Explanations
The Origins and Evolution of Private Equity
Private equity (PE) has grown into a global financial powerhouse, but its beginnings can be traced back to the post-World War II era. The formation of the American Research and Development Corporation (ARDC) in 1946 marked one of the earliest institutional private equity efforts.
ARDC’s mission was to fund companies that could repurpose wartime technologies for commercial use. One of its landmark investments was in Digital Equipment Corporation (DEC). A modest $70,000 investment in DEC eventually turned into $355 million, delivering a return of over 5,000 times the original amount. This staggering success demonstrated the potential of private equity to fuel innovation and drive extraordinary financial outcomes.
The Rise of Leveraged Buyouts in the 1980s
The 1980s became a transformative decade for private equity, largely due to the emergence of leveraged buyouts (LBOs). Pioneering firms such as Kohlberg Kravis Roberts (KKR) led this movement, acquiring companies primarily through borrowed capital, implementing operational improvements, and exiting through strategic sales or IPOs. These deals often resulted in significant returns and played a key role in legitimizing private equity as a powerful tool for value creation.
Private Equity Today: A Global Asset Class
Fast-forward to today, and private equity has evolved into a multi-trillion-dollar global industry. PE firms are actively involved in reshaping key sectors, including technology, healthcare, financial services, energy, and consumer goods. The United States continues to dominate the market, but institutional investors are increasingly turning their attention to opportunities in Europe and Asia where valuations are more attractive and growth potential remains robust.
In recent years, PE has also embraced thematic and impact investing. Many funds are aligning their strategies with ESG (Environmental, Social, and Governance) principles or specific global trends, such as digital transformation, renewable energy, and health innovation. This not only broadens investor appeal but also enhances the sector’s influence on global progress.
The Dominance of Private Companies
One compelling statistic underscores the importance of private markets: approximately 83% of U.S. companies with over $100 million in revenue remain privately held. This highlights the vital role of private equity in financing, developing, and scaling enterprises outside the public markets.
In summary, private equity has evolved from a niche investment strategy to a dominant force in global finance. With its origins in innovation and a future driven by strategic investment, operational excellence, and global diversification, PE is positioned to remain a key player in shaping tomorrow’s economy.
