MBO numbers fall but smaller deals power East Midlands

The East Midlands had a “steady” year in the private equity backed management buy-out market sector, according to new figures, although overall there was a decline in both the number and value of deals in 2018 compared to 2017.

There were nine deals in 2018 in the East Midlands region – down from 13 in 2017 whilst total value fell from £841m in 2017 to £371m in 2018. The spread across the year was however largely consistent – with five deals in the first half of the year and four in the second. Total deal values stood at £223m and £148m respectively in the two halves of the year.

The figures are based on provisional full-year data from The Centre for Management Buy-Out Research (CMBOR) at Imperial College Business School, sponsored by Equistone Partners Europe and Investec Corporate and Investment Banking.

The two largest deals in the region in 2018 were the sale of national recruitment agency Protocol in a deal worth around £75m in July, and IT solutions and telecommunications business GCI in a deal estimated to be worth £180m in May.

Nationally, there were 187 deals recorded in 2018 – marginally down from 196 in 2017. Deal values dropped significantly from £27.5bn to £18.7bn in 2018. Average deal sizes have also seen a decrease from £140.2m last year to £100.2m this year. Whilst, the figures show a fall year-on-year in both the number and value of private-equity backed deals, 2017 was an exceptional year with the highest value of all deals in eight years.

The volume of deals valued under £250m in the UK has remained stable (171 in both 2017 and 2018) and the cumulative value of deals in this range fell only slightly, from £6.1bn to £5.9bn.

Paul Harper, partner at Equistone Partners Europe’s Midlands office, said the fall in deal numbers and deal values in 2018 had to be seen in context.

“Both the East and West Midlands have seen a fall year-on-year in both the number and value of private-equity backed deals but 2017 was an exceptional year with the highest value of all deals in three years in the East Midlands and in eight years in the West Midlands.

“The numbers of deals in 2018 could well reflect uncertainty surrounding Brexit but based on current interest levels, activity is likely to resume once there is greater clarity over the outcome. The deal pipeline in both regions is encouraging with several expected to come to fruition in 2019.

“The small deals and lower mid-market – the backbone of the regions – is also showing resilience. There has been a steady supply of attractive companies with high-quality management teams – three of which Equistone has backed,” he added.

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