How To Lie with Statistics

The London newspapers this morning rang the death knell for UK private equity, based on a new report from the Centre for Management Buy-out Research (CMBOR).

CMBOR, backed by Barclays Private Equity and Deloitte, has been very cleverly courting headlines with dramatic figures showing that the value of the buyout market has dropped from £24.5 billion in the first half of 2007 to £11 billion in the first half of 2008.

Sounds bad, but here’s the reality: Buyout market value was skewed upwards in 2007 and has now simply normalized. How so? £11 billion worth of 2007 figure resulted from a single transaction – Boots. Without the Boots privatization, Q2 2007 would have only been worth only £9 billion, which would lower the first half to just £14 billion.

Christiian Marriott, head of investor relations at Barclays PE said: “We definitely agree that this market has normalized. If you drew a line from the last quarter of 2006 to the first quarter of 2008 on a chart, leaving out 2007, the loss would be markedly smaller.”

Looking back at the CMBOR statistics from 2006, in the first half of that year there were £11 billion worth of deals – exactly the same amount seen in 2008. And in the first half of 2005 there were £14 billion worth of completed deals done, according to CMBOR. In the first half of 2004 CMBOR recorded £9 billion in completed buyout transactions and 2003 saw £8 billion.

BTW: I did chastise CMBOR for its sensational headline “PE finally bows to credit crunch,” but apparently it was Deloitte’s turn to write the release.