Private equity investments plunge in North West

Private equity firms in the North West slowed their deployment of capital in 2022, in an exceptionally challenging market, according to new figures from CMBOR, the Centre for Private Equity and MBO Research.

In a separate announcement BGF, one of the largest and most experienced growth capital investors in the UK and Ireland, said it has achieved a record year for realisations in the North West.

CMBOR revealed 17 transactions were completed in 2022, worth a cumulative £873m. This fell from 35 deals in 2021, worth a total of £3.3bn.

While the value and number of deals dropped, there were still success stories in the region. Triton’s £400m acquisition of OCU Group in July was among the 20 largest deals in the UK across the UK.

As a whole, the North saw 38 completions, not far behind London’s 46. However, the gap in the value of transactions is proportionally wider, with London’s £16bn almost quadrupling the North’s £4.1bn.

The dip comes amid macro-economic factors such as war in Europe, soaring inflation and debt markets tightening, creating challenging conditions for private equity activity. Quarter four 2022 saw a slow end to the year with only one deal completion, a sharp decline when compared to Q4 2021’s 11.

With the UK economy teetering on the edge of recession, the fall in activity echoes 2009, when deal volumes and values plummeted in the wake of the global financial crisis, with nine transactions worth just £274m. The market would go on to rebound in 2010, which saw 18 transactions totalling £1.587bn take place.

Nevertheless, across Europe, the UK market was once again the busiest by volume and largest by value, with 189 buyouts totalling £35.2bn.

CMBOR is based at Nottingham University Business School and supported by Equistone Partners Europe. Sebastien Leusch, investment director at Equistone Partners Europe, said: “The decrease in the value and number of equity deals across the North West in 2022, is an indication of the challenging economic headwinds that we have been faced with in the last 12 months.

“Nevertheless, we are seeing a really promising number of high quality management teams and businesses coming not just from the North West, but the North as a whole, with the region becoming a hotbed for unicorns.

“The UK has and will continue to be a hub for private equity activity in Europe, and we hope to see more of this coming from the devolved nations and regions, but in the face of COVID, war in Europe and profound economic headwinds, the market is entering 2023 with a degree of trepidation.”

Meanwhile, BGF completed three highly successful exits in the region during the year with an enterprise value of £400m and a combined money multiple of more than 3.7x.

In 2022, BGF exited St Pierre Groupe, an international market leader in the bakery sector headquartered in Didsbury, following its acquisition by Grupo Bimbo, one of the world’s largest baked goods and snacking companies. BGF originally backed St Pierre Groupe with an £8m investment in November 2018. The exit generated a money multiple of 9.6x and an IRR of 85% for BGF.

In addition, BGF exited both Liverpool’s Sentric Music, which was acquired by Swiss fintech company, Utopia Music, and Manchester-based NSS, which was acquired by Premier Technical Services Group (PTSG).

In the North West, £53m was invested into the local growth economy, with BGF completing seven new deals in 2022, including Heywood-based logistics and courier specialist, ITD Global and Wigan-based Evolution Aqua, a designer, manufacturer and supplier of aquatics and water filtration products. Other deals in 2022, include social media business KOMI Group, R&D tax relief specialists RDS and apprenticeship training provider Apprentify.

Neil Inskip, head of BGF in the North West and Midlands, said: “Over the last 12 months, the team has continued to demonstrate the strength and diversity of the BGF investment model, supporting companies to achieve their growth potential while delivering exceptional returns for businesses and all shareholders.

“Our proven approach continues to resonate with businesses and it has allowed us to back a wide range of emerging and high growth sectors, while supporting portfolio companies to achieve their ambitions.”