Sponsored deals — mergers and acquisitions backed by private equity firms that engage in buyout investing — reached a record total of $493.8 billion worldwide in 2005, according to a preliminary report by Dealogic.

That record represents an 18 percent increase on the total for 2004. Dealogic added that this year, sponsored deals accounted for 17 percent of total global M&A activity.

Globally, the telecommunications sector led the way with volume of $78.7 billion, up a whopping 114 percent from the prior year. A large contributing factor was the $15.6 billion acquisition of Denmark’s TDC by Apax, Permira, The Blackstone Group, Kohlberg Kravis Roberts, and Providence Equity Partners — the largest-ever buyout in Europe and the second-largest globally. The computer and electronics sector accounted for nearly $53 billion of deals, up 64 percent from 2004’s volume.

In the United States, the volume of sponsored deals climbed 13 percent in 2005, to $217.9 billion, and accounted for 44 percent of global sponsor-backed activity. The computer and electronics industry was the most active; total volume reached $32.2 billion, up 59 percent from 2004.

The Future of Finance Has Arrived

The pace with which finance functions are employing automation and advanced technologies is quickening. Rapidly. A new survey of senior finance executives by Grant Thornton and CFO Research revealed that, for just about every key finance discipline, the use of advanced technologies has increased dramatically in the past 12 months.

Read More

Two $10 billion-plus U.S. private-equity deals were announced in 2005. At the top of the list: the $15.1 billion purchase of Hertz by a group including Clayton Dubilier & Rice Inc., The Carlyle Group, and Merrill Lynch Global Private Equity. The largest technology privatization was the $11.4 billion purchase of SunGard Data Systems by a consortium organized by Silver Lake Partners that also included Bain Capital, Blackstone, Goldman Sachs Capital Partners, KKR, Providence, and Texas Pacific Group.

There were also 39 deals announced between $1 billion and $10 billion. Due to the large number of big-ticket buyouts, the average deal size was a record $182.9 million.

Meanwhile, another large deal is reportedly in the works. The New York Times reported that Affiliated Computer Services may be bought for $8 billion by a group of private-equity firms including Texas Pacific, Bain, and Blackstone.

As for 2006, USA Today noted it could be a busy year for buyout firms cashing out their holdings, selling to other private-equity firms, or taking companies public in the IPO market.

Indeed, according to Dealogic, in 2005 there were 81 sponsor-backed initial public offerings, worth $18.9 billion. These offerings accounted for 51 percent of total IPO volume, compared with 32 percent in 2004.

(For further coverage of North American dealmaking in 2005 and a look ahead to 2006, see “A High-water Mark?” in the January issue of CFO, to be published January 1.)

Leave a Reply

Your email address will not be published. Required fields are marked *