NW deals volume jumps, but value slumps due to slowdown in higher end of market

The North West closed 2022 with a 10-year high in terms of deal volume – up to 946 – although deal values slumped.

This volume figure represented a five per cent uplift year on year and the comparison with the previous 10 years is even more favourable, according to the Experian M&A review for 2022.

Activity was driven by smaller transactions, which returned a 17% boost in volume and an 8.3% increase in total value, although a slow down at the higher end of the market meant that the recorded value for the bumper crop of deals fell by more than 60% – albeit from the impressively high total value of £21.6bn in 2021 – to £7.9bn last year.

Drilling down, the volume of acquisitions in the North West was up by 12% to 668 in total and it remains the most popular type of deal for the region.

Growth funding, while more subdued than acquisitions, also experienced a boost, with a two per cent increase to 135 deals. While the more traditional management buyout transaction saw volume decline year on year, employee buyouts remained consistent, suggesting this deal type is gaining the interest of owners of North West based firms as an alternative method of exiting the business.

There was a North West element in approximately 13% of all UK transactions by volume in 2022, while North West firms contributed around three per cent of total deal value.

During 2022 there was a total of 21 large transactions recorded in the North West, worth more than £5.6bn.

The majority of the region’s bigger deals were acquisitions, with the notable exception of two Unilever share buybacks and the investor buyout of K3 Capital Group of Bolton, a provider of corporate finance and brokerage services, by US private equity house Sun Capital Partners at a value of £257m.

There was US involvement in three more of the region’s top deals, including two with US bidders and North West targets and on the outbound side, Northwich veterinary pharma group Dechra Pharmaceuticals’ $260m acquisition of California-based Med-Pharmex.

Cross-border analysis reveals that while the volume of North West-based bidders acquiring US targets has been in steady decline since 2019, the reverse is true of US bidders acquiring North West targets, which have risen to 17 deals in total for 2022.

The top three sectors for deal volume in the North West all saw their numbers rise in 2022. Professional services remained stable, with a modest 2.6% increase to 241 transactions, while manufacturing deals jumped by 26% to 219.

The most valuable sector was the third most active, wholesale and retail, with 213 deals worth £3.3bn, while the health care and hospitality sector have both enjoyed a bumper year in terms of deal volume with more than 60% increases, up to 110 and 40 deals, respectively.

Meanwhile, M&A in the infocomms sector, traditionally high performing in the region, slowed last year in comparison with a prolific 2021, slipping from second to fourth position in terms of volume and down by 86% in terms of value year on year.

While growth funding deals increased from 2021, the volume of IBOs and SBOs fell, impacting the number of transactions funded by private equity with a nine per cnt decline on last year’s figures settling on 163 deals worth £1.5bn.

The most active investor in these 163 transactions was Northern Powerhouse Investment Fund with 11 deals worth £13.6m, followed by Praetura Ventures and Business Growth Fund, each on eight deals apiece, valued at £66m and £42m, respectively.

In contrast, debt funding deals in the North West are making a resurgence in 2022 with 82 transactions so far, 17% up on last year.

While the overall value of these deals fell from £2.2bn, the increase in volume suggests that debt providers are still confident to fund deals in the North West, but with smaller associated values.

HSBC was, by far, the most prolific of these debt providers, with almost double the volume of joint second place firms Shawbrook Bank and Arbuthnot Commercial Asset Based Lending.

In terms of value, the legal adviser ranking was topped by Hill Dickinson with 45 deals to its name, followed by Brabners (43), Napthens Solicitors (43), last year’s table topper, Addleshaw Goddard (37), and Gateley (31).

The financial adviser ranking was once again headed by K3 Capital Group (60), followed by Dow Schofield Watts (49), Cortus Advisory (34), BDO (27), and Altius Group (27).