Accounting Giants At Loggerheads –

LONDON – Two of the big five accounting firms openly disagree as to whether buyout activity in the United Kingdom rose or fell in the second quarter – and what the prospects are for the remainder of the year.

KPMG Corporate Finance said its latest study has shown that the value of larger – GBP10 million-plus ($15.6 million-plus) – management buyouts, management buy-ins and institutional buyouts had dropped to GBP2.8 billion the first quarter from GBP3.35 billion ($4.4 billion from $5.2 billion).

Furthermore, the firm said the total figure for April to June was skewed by one massive deal – the GBP1.4 billion ($2.2 billion) Zeneca specialty chemicals transaction, which, if left out, would reduce the value of deals in the second quarter by half.

KPMG also said the number of deals in that period fell to 29, compared with 33 in the first three months of 1999 and 40 for the same quarter a year ago.

Deloitte & Touche maintains, however, that growth in the buyout market had “rocketed” in the second quarter to GBP3.8 billion ($6.01 billion) – an increase of 30% in the first three months.

A spokeperson for Deloitte & Touche said one possible reason for the discrepancy was that the firm’s analysis considered deals less than GBP10 million in value. “We cover all buyouts in the U.K. Our figures are correct according to that,” she said.

But Mike Stevens, head of MBO services at KPMG Corporate Finance, said this would account for a difference of only about GBP200 million ($311.5 million). He said that the widely differing conclusions amounted to “different interpretations of the same statistics” and that the GBP1 billion ($1.55 billion) difference in the value of deals in that quarter was probably due to the way transactions had been assigned between the two periods. “I’m looking at the same numbers and saying it’s down a bit,” he said.

Mr. Stevens added that he did not expect the situation to improve in the short term. “I just sense a fair amount of market caution at the moment,” he said.

Deloitte & Touche was far more upbeat. Chris Ward, head of advisory services at Deloitte & Touche Corporate Finance, said companies moving away from the quoted sector are fuelling the bonanza. “We are not only seeing more public-to-private (PTP) deals, but they are inceasing in size,” he said. Compared with 27 in the whole of 1998, in the first half of 1999 there were 37 completed or announced PTPs. At this rate, the venture capitalists soon will have mopped up the best of the quoted small-cap sector.”