Region sees fall in number of private equity backed MBOs
The West Midlands saw a decline in the number of private equity-backed management buy-out deals in the year to date compared to last year’s figures, but the number of deals completed in the second half of the year were significantly higher than in the first six months of 2018.
There were ten deals in 2018 in the region – down from 22 in 2017 – of which seven were completed in the second half of the year.
A similar picture has emerged in deal values with the total value of deals in the second half of the year at £1.3bn – three times higher than the £42m recorded in the first half of 2018.
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 largest deals of 2018 in the West Midlands included Blackstone’s acquisition of NEC Group from LDC in a deal estimated at £800m and the sale of HB Education – the holding company for schools and activity holidays firm PGL – to investment company Midlothian Capital Partners and a consortium of investors in a £467m deal. Both were in October.
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 Birmingham office, said the fall in deal numbers and deal values in 2018 had to be seen in context.
“Both the West and East 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 eight years in the West Midlands and in three years in the East 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.
