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UK private equity firms seek more bilateral deals as competition rises

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UK private equity firms seek more bilateral deals as competition rises

The number of bilateral deals involving U.K.-based private equity firms grew by 71% year over year in 2017, the Financial Times reported June 4, citing Investec research.

The aggregate value of the 587 deals studied by the bank grew to £7.98 billion in 2017 from £1.06 billion in 2016, representing 19% of all deals, the research showed.

Reason for the surge in bilateral transactions is the growing competition in auctions which leads to record-high valuations, the FT said, citing private equity insiders. This is why buyers increasingly prefer a direct deal with the seller, it noted.

Sellers also see benefits in bilateral transactions as these deals offer them a way out of the bidding race in auctions and to avoid the risks of listing on volatile markets, an unnamed source told the FT.

The rise in bilateral deals is coupled with an increase in the number of failed auctions, according to Investec. The percentage of failed auctions for deals at estimated enterprise value of £100 million to £250 million has increased to 42% at March-end from 39% in the previous 18 months, the research showed.