Private equity firms have once again found the UK stock market a happy hunting ground in 2024, making a series of take-private acquisitions.
Part of the attraction is due to “uncharacteristically low levels” of price-to-earnings ratios, according to a report from investment bank Peel Hunt that we covered at the start of the year. It found that the FTSE 250 was trading on a 12-month forward price-to-earnings ratio of approximately 11x versus around 15.5x in January 2022.
That tallied with what Searchlight Capital Partners founding partner Oliver Haarmann told us: “So long as very large-cap tech companies continue to drive stock market indices, while more medium-sized healthy yet moderate-growth companies continue to trade at significant discounts and receive less attention from analysts, take-private activity will be of interest.”
But with bargains on offer in the UK, did that affect the kind of premiums that private equity had to pay when compared with the US, where many of the PE buyers were based?
We looked at similar take-privates on both sides of the Atlantic to find out.
Cybersecurity
US tech investor Thoma Bravo completed its take-private of Cambridge-headquartered cybersecurity company Darktrace at a valuation of around $5.3 billion in October. The offer price, agreed in April, was a multiple of approximately 34x London-listed Darktrace’s adjusted EBITDA for 2023.
It was also a premium of 20 percent over Darktrace’s previous closing share price of 517p, and 44.3 percent over the last three-month average.
Around the time of that agreement, in May, Austin-based Haveli Investments completed its take-private acquisition of ZeroFox, a Baltimore-based and Nasdaq-listed provider of external cybersecurity. It was a much smaller deal – an enterprise value of around $350 million – but offered a similar premium, of 45 percent over the previous 90-day trading average, a price agreed in February.
Digital transformation
BC Partners portfolio company Valtech wrapped up its take-private of Kin + Carta, a London-headquartered and listed digital transformation consultancy, in April.
The transaction, valued at £239 million ($302 million; €289 million), was based on an offer of 130p per share in December 2023 that outbid a rival offer of 120p a share by Apax Partners.
The price gave a premium of 66.7 percent to the closing price just before Apax made its first offer in October, 66.2 percent to the three months to that point, and 79 percent over the six months to that point.
A month after BC Partners closed that deal, EQT agreed a take-private for Perficient, a global digital consultancy headquartered in St Louis, Missouri. It was a much bigger deal than Kin + Carta – with an enterprise value of about $3 billion – but again the premiums were in the same ballpark. The purchase price was a 75 percent premium to the closing stock price on the last trading day before the announcement and 51 percent to the previous 30 days.
EQT closed the take-private in October.
It seems that while private equity firms might be finding bargains in terms of price-to-earnings ratios in the UK – as well as willing sellers among management teams and shareholders – the premiums required are in the same area as in the US.
But with all those factors still in play as we go into 2025, we expect to see more UK-listed businesses take the private option when it comes calling.
