North West private equity activity continues to fall in first half of 2023

Sebastien Leusch

Private equity activity has continued to fall across the North West in the first half of 2023, following a slow year in 2022.

According to provisional half-yearly data from CMBOR, the Centre for Private Equity and MBO Research based at Nottingham University Business School and supported by Equistone Partners Europe, seven transactions were completed in the first half of the year, representing a 22% drop from the same period in 2022, when nine deals completed.

Deal volume also fell by 30% when compared with the second half of 2022, when 10 deals completed.

Despite this, the North West still outperformed other UK regions, with the joint highest volume of private equity deals outside London, along with the East of England.

However, while deal volume fell in the first half of 2023, deal value saw a 125% increase when compared with the first half of 2022, rising to a cumulative value of £375m. The rise in the region’s deal value represents the highest level outside of London. Notably, Sun European Partners’ £271m acquisition of Bolton-based K3 Capital in February was among the 20 largest deals in the UK.

The region’s extensive services and innovation expertise, particularly Manchester’s Oxford Road Corridor and Liverpool’s Knowledge Quarter, was reflected in three deals being completed in the business and support sector, while two completed in the technology, media and telecoms (TMT) sector.

Across the North of England, 13 deals completed in the first half of the year, accounting for 22% of all UK deals. In terms of completed transactions, the North was not far behind London’s 17, although deal value remained lower, attracting £795m in capital as opposed to over £2bn in London.

The continued dip in private equity activity comes amid stubborn inflation figures and rising interest rates across the UK and much of Europe.

Given widespread economic uncertainty in the first half of the year, the fall in deal volume has been attributed to a lack of supply, with private equity firms holding out for a rise in valuation figures before bringing assets to market.

Despite this, the UK market was once again the busiest by volume and came in second in terms of value, with 59 buyouts totalling €5bn. Germany represented the largest market by value with €5.6bn from 39 deals, while France, with 42 buyouts worth €4.7bn, ranked second for volume and third in terms of value.

Sebastien Leusch, investment director at Equistone Partners Europe, said: “Just as we saw in the second half of 2022, persistent economic uncertainty coupled with rising interest rates and inflation have all created a more challenging market.

“Given this, the fall in the number of deals across the North West in the first half of 2023 isn’t surprising. However, it’s encouraging to see deal value increase to the highest level outside London, underlining the strength of businesses and expertise in the region.”

He added: “As we head into the second half of the year, we’re likely to see deal activity begin to pick up again across the UK, given the pent-up supply from private equity houses. There remains a number of ambitious, high quality management teams and businesses both in the North West, as well as across the North of England. Therefore, the region is likely to continue being a hub for private equity deal activity over the coming years.”

Prof Kevin Amess, director of CMBOR at Nottingham University Business School, said: “Although the record-breaking numbers we saw post-pandemic may seem like a distant memory, there are reasons for cautious optimism.

“The dip in volumes experienced within the small-cap and mid-market segments has been much more subdued, which is good news for the industry given the former segment’s role as a crucial incubator for growing businesses and the mid-market’s contribution to value creation via buy-and-build activity. As highly disruptive macro forces gradually abate, we can expect buyout activity to stage a strong recovery fuelled by record levels of dry powder.”

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