Report shines light on region’s dealmaking activity

Deal activity across the Midlands region remained static in 2018 compared to the previous year, with the 977 deals announced being just 1% less than the 987 recorded in 2017.

The total is also just over 4% less than the 1,020 recorded in 2016 but remains higher than all other yearly totals in the last decade, according to latest data published by Experian MarketIQ, which tracks M&A deals valued at more than £500,000 at regional and national level.

Overall total deal value fell by 1.8% to £18.2bn, but was 35% higher than the 2016 total despite the slightly lower volumes.

The Midlands was the third busiest region of the UK in 2018, with involvement in 13% of all deals by volume and 4.9% by total value.

The takeover of venerable Redditch-based automotive manufacturer GKN by Birmingham-based Melrose Industries for £8.1bn, which was announced in January and completed in May, has remained the largest deal announced in the region throughout the year and by a considerable margin.

It was almost seven times the size of the next largest transaction, which saw a consortium of long-term infrastructure investors agree to acquire the remaining 25% interest in Coventry gas distributor Cadent Gas for £1.2bn, with the deal due to be completed some time in 2019.

Manufacturing was again the busiest industry of the year, with 308 announced deals worth £12.1bn, accounting for approximately 32% of all deals and almost 67% of total overall value for the region.

This represents a 70% increase in total value for the category compared to the previous year, despite volume actually being just over 2% lower than 2017’s total of 315.

The second most active industry was wholesale and retail having been represented in 25% of all deals, with professional services coming in third at 24%. The utilities industry saw the greatest increase in value year on year, with a massive 1,397% jump to £1.9bn, with the lions share accounted for by Quadgas’s takeover of Cadent Gas – making it the Midlands’ fifth most valuable industry by deal activity.

Just over 15% of deals in the region were financed via private equity, making it the second most common form of funding in the region behind cash. The 150 deals funded this way also represented a 34% increase in the number of private equity deals compared to last year; however despite the volume increase the overall value of PE funded deals dropped by 74% to £974m.

The next most common source of funding was bank debt, which was involved in funding just under 14% of all deals in 2018.

Advisers Gateley were once again the region’s most active legal adviser and by a considerable margin, advising on a total of 69 deals. Placed second was Browne Jacobson on 45.

The value table was topped by Pinsent Masons, which advised on deals totalling just under £9.4bn, including the two largest deals of the year.

Not far behind in second place was Simpson Thacher & Bartlett, which advised on deals worth a total of £9.2bn, including the first and third most valuable deals.

BDO and KBS Corporate led the financial adviser volume table, each with 32 deals, with RSM in third position on 30; RBC Capital Markets were top of the financial value table on £8.5bn, with Rothschild in second-place position advising on £8.2bn worth of deals.

There were 144 small deals recorded in the region during 2018, 23% less than in 2017 with a similar 22% drop in total value to £446m.

Deal activity was up just over 3% in the mid-market value segment to 96 announced deals, with a 12% jump in total value for the category to £3.4bn.

The number of large deals announced fell 23% to 20, with a corresponding 51% decline in value to £3.9bn.

Three mega deals were announced in 2018 equalling the total for the previous year; values however jumped by 51%, to just under £10.4bn.