More cautious approach to deals as M&A activity re-sets to pre-pandemic levels

Professional services was the most active sector representing 29% of all financial deals in the North West during the first half of 2022, according to the latest mergers and acquisitions review by information services company Experian.

It said as M&A activity re-sets to pre-pandemic levels, and the frenzied deal-making that defined the first half of 2021 slows to a more sedate pace, the latest figures show a more cautious approach in the first of half of 2022.

While the volume of transactions in the North West has dipped by around 11% year on year, the region’s figures are relatively strong compared with the past 10 years.

When looking at the average first half volume figures of 397 deals, so far this year has returned a very solid performance, with 430 deals announced in total, although the value figure shows a decline of more than 50% from the same period in 2021, to £4.3bn.

This slightly subdued start to the M&A activity was reflected across the rest of the country and the North West outperformed several other regions of the UK in volume terms.

There were pockets of growth and there was an increase in the volume and value of small transactions in the North West by around eight per cent, in contrast to slowing activity in the mid-market, large and mega deals segment.

Deal type analysis shows acquisitions and development capital deals have remained relatively stable, increasing by one per cent and 1.5%, respectively.

Acquisitions remain the most popular transaction type in the North West with more than 73% of all transactions and 34% of their total value.

There was a North West element in approximately 14% of all UK transactions by volume so far this year, while North West firms contributed around 3.2% of total deal value.

Eight large deals were recorded in the North West in the first half of 2022, the majority of which were acquisitions, with two high value development capital transactions in the telecoms sector announced in May of this year.

The first saw ITS Technology Group of Chester, a provider of broadband infrastructure and information technology managed services, secure £100m of funding in a second private investment from Aviva Investors.

The second was Manchester-based Freedom Fibre, a provider of high-speed broadband fibre network connectivity services, which raised £100m in scale-up funding.

The financing included a major £84m investment from infrastructure investor Equitix, alongside Santander Bank also signing a £16m debt facility.

The largest deal recorded so far this year was the first tranche of share buyback by consumer goods conglomerate Unilever, which is registered in Port Sunlight on Merseyside, valued at more than £624m.

Unilever intends to purchase a total of €3bn in the programme overall, with the intention to launch a second tranche in the third quarte of this year.

Notable acquisitions involving North West firms this year included the £250m cash acquisition of Cheshire land promotor Gladman Developments by development firm Barratt Developments and Auto Trader’s £200m acquisition of Autorama UK, in Hemel Hempstead.

The North West’s professional services sector continues to dominate the region’s deal landscape, despite the volume of deals dropping by 10% from 136 deals down to 123 so far this year.

Elsewhere, there were several sectors that bucked the downward trend, with particularly strong activity in health, where deals were up by more than 50% to 52 transactions worth £52m.

Deals in education, hospitality and support services were also up year on year.

Infocomms was the region’s second most active sector and its leading source of private equity investment, with 24 deals worth a total of £250m.

There has been a slight decline in the number of bank debt funded transactions in the North West for the first half of 2022, with 11% fewer deals.

HSBC was the most active provider, with 18% of all debt funded deals with a recorded value of £15m.

The downturn in equity funding was more pronounced with a 22% decline compared with the same period last year.

Business Growth Fund was the most prolific investor in the North West with a total of seven transactions worth in total £27m.

Maven Capital Partners also invested strongly in the region, with five transactions worth more than £17m.

Interestingly, the volume of investor buyouts has almost halved in the past six months compared with the first half of 2021, suggesting that equity firms are choosing smaller stakes rather than majority ownership in the North West.

Napthens retained its position at the head of the table of legal adviser rankings with 23 deals, followed by Hill Dickinson, on 21, which moved up from 10th last year.

Financial adviser rankings saw Dow Schofield Watts moved up from second last year to first in 2022, with 20 deals, followed by Cortus Advisory which stayed in second spot, on 16 deals, the same as K3 Capital Group which was previously in first spot in 2021.