The UK private equity market dropped by 80 per cent in the final quarter of 2007 - the first truly authoritative figures on the full extent of the credit crunch reveal.
The value of UK buyouts in the fourth quarter was £2.9 billion compared to £15.4 billion in the third quarter, according to figures released by Midlandsbased CMBOR, the sector expert founded by Barclays Private Equity and Deloitte.
Yet, despite the three-month hit, 2007 still produced a record total deal value of £42.2 billion compared to £26.5 billion in 2006.
Mark Pacitti, corporate finance partner at Deloitte, said: "The credit crunch has had a dramatic impact on bigger private equity deals in quarter four, which has impacted the year's overall deal value and volume.
"However, while mid-market deals - £10 million to £1 billion - were also down, overall in 2007 the value at £20 billion was consistent with the last three years.
"Analysis of deals by sector over the year reflects the downward trend in UK consumer confidence - leisure sector deals in 2007 dropped 80 per cent to just £1.26 billion after £5.56 billion in 2006. Business and support services showed the greatest increase trebling from £2.46 billion last year to £7 billion this year - demonstrating a private equity preference for business exposure rather than consumer exposure."
Fourth quarter figures suggest quieter times ahead for buyouts, admits Tom Lamb, co-head of Barclays Private Equity.
He said: "This has been the quietest single quarter for UK buyouts since 2003, and puts the UK buyout market back to 1997-98 levels on a run-rate basis.
"With around £35 billion raised by UK private equity funds in the last two years, this trend suggests it could take several years to invest the current generation of funds compared to the two or three years which has become the norm."
Turning to exits for buyout companies, Mr Lamb said: "The credit crunch has hit all new deal activity, hurting secondary buyouts as an exit route.
"Having accounted for 12 of the top 30 exits in 2007, there wasn't a single secondary buyout over £250 million in the last quarter. IPOs of buyouts are also down - 11 of 2007's buyout flotations took place before the credit crunch. Until the credit markets recover, buyout funds could have a problem on both buy-side and sell-side."
Exit value is down by 24 per cent from 2006; there was a record total exit value in 2006 at £26.9 billion compared to 2007's £20.5 billion. However the total number of exits in 2007 was the highest ever recorded at 355.
Fund-raising is down by 33 per cent from 2006 at £15.2 billion, after a record total of £20.2 billion set in 2006.
Public to private buyouts slowed in the fourth quarter at £1.4 billion, in sharp contrast to the first nine months at a record £18.1 billion.
Pricing and debt levels rose in 2007. Earnings before interest and tax multiples for buyouts over £100 million stood at 19.7 in 2007 against 16 in 2006. Debt to EBIT multiples are also high for larger buyouts with this ratio reaching 11.4 in 2007 compared to 9.1 in 2006.
Only three of the top 30 deals of over £250 million were completed in the final quarter, with the largest being the public to private buyout of Monsoon at £755 million in December.
Deal flow slowed markedly in the fourth quarter with 75 buyouts after 153 in the third quarter.
Receiverships were up from 70 in 2006 to 95 in 2007, the first rise since 2002. More than half of the UK's major companies now believe the turmoil in credit markets will adversely affect their businesses in 2008, according to a survey by Deloitte.
The second quarterly survey of chief financial officers found 58 per cent expect a negative impact from the credit crunch, up from 42 per cent in September.
Meanwhile, short-term business confidence is at its lowest level since January 2006, reflecting poor high street sales, slowing house prices and rocketing oil prices, according to the latest BDO Business Trends report from accountants BDO Stoy Hayward.
BDO Stoy Hayward partner Peter Hemington said: "With business confidence falling, particularly in the service sector, we believe further rate cuts are necessary during the first quarter of 2008."