NW first half mid-market private equity deal activity above pre-pandemic levels

Richard Stark

Mid-market private equity activity across the North West held firm during the first half of 2022, with 45 deals boasting a total value of £2.2bn taking place.

A new study collated by KPMG revealed that, while both deal volume and value were down on the first six months of 2021 – 52 and £2.8bn, respectively – they were up on pre-pandemic levels.

Overall, the UK exceeded historic levels of both deal volumes and values during the first half of 2022, excluding the unusual peak in activity during 2021, compared with the same period in both 2018 and 2019.

Bolt-ons accounted for nearly two-thirds (62%) of all mid-market deals – the highest half-yearly proportion on record – due to them being viewed as a low-risk strategy to support the growth of existing platform businesses. The aggregate value of bolt-ons in the first half of 2022 was £12.7bn, also notably higher than the levels seen in both 2018 and 2019.

Business services and TMT maintained the top spots in terms of sectors with the most mid-market deals, accounting for 60% of private equity investments. The ongoing trend for hybrid working and digitally enabled services encouraged this trend.

Richard Stark, North West corporate finance director and head of private equity for the North at KPMG, said: “It’s encouraging to see North West businesses continue to attract private equity investment to support the next phase of their growth journey. These latest findings are testament to the region’s active mid-market and the investment landscape.

“Positive mid-market activity in H1 was driven by residual fear of a possible Capital Gains Tax increase in April 2022, albeit not to the extent of the previous year, causing vendors and dealmakers to push deals through before any possible change.

“We also observed a growing number of business owners who de-risked their personal asset portfolios as the UK slowly emerged from the pandemic and the general outlook improved.”

He added: “Existing factors, such as high inflation, the Russia-Ukraine crisis and oil price rises, will persist, and there is also likely to be increased caution, too, amongst banks, creating a probable slowdown in the number of mid-market deals in H2.

“On a brighter note, once oil prices level off and interest rate rises come through, the market should pick up again.”