Northern private equity deal values fall in 2018
The value of private equity deals in the North of England dropped significantly in the first half of 2018, falling by us much as 82% from the same period last year.
Despite this, private equity investment remained an important source of capital for entrepreneurs and fast-growing companies, as demonstrated by the continued buoyancy of small buyouts.
The latest figures from the Centre for Management Buyout Research (CMBOR), sponsored by Equistone Partners Europe and Investec Specialist Bank, show that Northern deal values totalled £911m from 17 deals in the first six months of 2018.
The figures fall significantly short of last year, when the North completed deals at a value of £4.889bn in H1 2017 and surpassed the capital to reach their highest levels since the recession at £8.993bn from 45 deals across the entire year.
This was with the support of two mega deals, transacted in the North East and North West regions. They were Epiris’ sale of North East headquartered Parkdean Resorts to Onex Corporation for £1.35bn, and the sale of Manchester smart metering financing firm Calvin Capital to KKR for £1bn.
Comparatively, the largest deals transacted in the North to date in 2018 were the sale of TPG Capital’s stake in UK-based mattress foam supplier, Vita Group, at an estimated value of £338m, and Equistone’s sale of travel company Travel Counsellors to Vitruvian at an estimated value of £200m. Both deals were transacted from the North West.
While total buyout values fell, there has been a continuation in the value of deals completed in the North’s small buyout market (EV < £10m), with the value of deals increasing from £25m in H1 2017 to £28m in H1 2018.
The North is also set for a strong end to 2018, with a further £3.35bn worth of deals executed in H1 due to complete in the second half of the year.
Sebastien Leusch, of Equistone Partners Europe, said: “Following an exceptionally strong 2017, in which we saw the completion of a number of significant deals in the North, it is perhaps unsurprising that there has been a pronounced downturn in market activity so far this year.
“These changing market dynamics require investors to be more adaptable. There remain opportunities to create value and generate strong returns across a range of sectors in the Northern market, and we have confidence that the appetite for dealmaking is such that we will see an uptick in activity in the coming months.”
Shaun Mullin at Investec, said: “We are seeing strong appetite from private equity houses – many of which have recently raised capital – to back primary deals, particularly as the business’s first injection of institutional capital. Such funding is often providing succession solutions for owner-managers or to support ambitious management teams to achieve their development aspirations, whether organically or through acquisition.
“This is in essence private equity getting back to its roots of providing flexible funding and assistance to fast-growing businesses, and equally helping to promote those companies where accessing capital is often the most difficult.”
