The financial fall-out of the credit crunch had a grim impact on the West Midlands' private equity market in 2007, according to the latest figures from the Centre for Management Buy-Out Research, founded by Barclays Private Equity and Deloitte.
The total value of deal completions fell by almost £1.6 billion year on year - from £3.65 billion in 2006 to £2.06 billion.
The number of completions in the region also dropped from 67 to 62 during the same period.
In the final quarter of the year, the number of deals fell from 14 to 11. Values, however, increased dramatically, rising from £40.4 million in Q3 to £747.3 million.
This was mainly due to the £600 million secondary buy-out of Alliance Medical, in December, and the £80 million secondary buy-out of M & M Direct, in October.
Nationally, the private equity market suffered an 80 per cent drop in the final quarter of the year, with the value of UK buy-outs falling to £2.9 billion compared to £15.4 billion in Q3.
Nick Johnson, corporate finance partner at Deloitte in Birmingham, said: "Looking at the UK private equity market as a whole, the credit crunch clearly had an impact on bigger private equity deals in Q4, which impacted the year's overall deal value and volume.
"In the West Midlands, whilst there was a degree of caution in the market, the impact was not so dramatic.
"There is still a significant amount of activity in the mid-market and an appetite from funders to back quality businesses.
"The capital gains tax changes are also driving a high level of activity which will continue to the end of March.
"We will have a clearer picture of the state of the market once the Q1 2008 figures have been released, but it may even be Q2 before there is real clarity."
Phil Griesbach, director of Barclays Private Equity in Birmingham, said: "The headline figures look bleak but the detailed reason for the drop is less concerning.
"The West Midlands is dominated by the mid-market scene which is populated with deals of between £10 million and £100 million.
"It is at values above this level where we have seen the biggest fall in numbers of transactions.
"There are still plenty of deals out there in the core Midlands' market."
Analysis of deals by sector during 2007 reflects the falling level of consumer confidence.
Leisure sector deals in the West Midlands dropped from £738 million in 2006 to just £96 million in 2007.
The retail sector also suffered heavy losses, with deal values plummeting from almost £1.5 billion to £165 million year on year.
Business and support services showed the greatest increase, rocketing from £8 million to £299 million year on year, demonstrating a private equity preference for business exposure rather than consumer exposure.
* World economic growth could miss the International Monetary Fund's forecast of 4.1 per cent this year if US and European banks disclose more major losses on the sub-prime market, the head of the IMF has said.
The IMF cut its 2008 global growth projection to 4.1 per cent last month from a previous forecast of 4.4 per cent, blaming the weak outlook in the United States and Europe.
Dominique Strauss-Kahn noted: "Are there some downside risks?
"Yes, of course. Mainly, we don't know exactly today if the whole disclosure on the sub-prime crisis has been done.
"It looks as if in the United States, a lot has been disclosed.
"Many experts say that in Europe some disclosure has still to come, so it's very difficult to know."
US banks set aside a record $31.3 billion for loan losses in the 2007 fourth quarter to offset weakening conditions in the housing and credit markets, the Federal Deposit Insurance Corp said.
For all of 2007, the US bank industry set aside $68.2 billion for potential loan losses, the agency said in its quarterly report.
The industry's delinquent loans jumped 32.5 per cent to $26.9 billion in the fourth quarter, the biggest quarterly percentage rise in 24 years.