The U.K. pension buyout market showed signs of accelerating in December after dramatically slowing down following the Lehman Brothers bankruptcy in September, according to data from KPMG.
“The January sales should offer opportunities” for pension buyout companies prepared to “hit the ground running in 2009,” Ben McDonald, pensions partner at KPMG, London, said in a telephone interview. “Some of the deals that had been put on the back burner will come back to life again.”
In December, three transactions totaling almost £1.3 billion ($1.9 billion) were announced within a week. On Dec. 15, Pension Insurance Corp. announced the largest buyout in U.K. history when the firm agreed to take over the £1.1 billion Thorn Pension Fund, Crawley, England. Two days later, officials at Legal & General announced they had agreed to insure pension liabilities totaling about £150 million of the Dairy Crest Group Pension Fund, Esher, England. Dairy Crest has about £670 million in assets, according to the 2008 Pension Funds and their Advisers.
On Dec. 19, Pension Insurance Corp. separately agreed to acquire the £20 million Merchant Retail Group pension fund, London.
“What we’ve seen in the last few weeks is that markets have stabilized,” Mr. McDonald said, referring to the cost of transferring pension liabilities to an insurance company. “There’s also a rush to get deals closed by the end of the year.”
In 2008, KPMG estimates that buyout transactions totaled about £7 billion to £8 billion compared to £2 billion to £3 billion the previous year. The overall U.K. pension market is estimated at about £1 trillion; so far, the total pension liabilities transferred in buyout deals has amounted to “only a scratch in the surface,” Mr. McDonald added.