North West M&A activity declines and deal values drop during third quarter

The North West M&A market has yet to return to the volume recorded last year, experiencing a seven per cent decline, to 654 deals, during the third quarter of 2024, new data from data analytics specialist Experian shows.

This mirrors the UK trend, positioning the North West as a reliable indicator for the broader market.

However, the region diverges significantly in deal values.

Unlike the rest of the UK, the North West saw a 22% drop in deal value, to £13bn. A closer look at deal value reveals a robust mid-market, with a 30% increase in volume, and large deals, which remain steady at 16 deals.

The small segment continues to struggle, while the mega segment contracted, from four deals in 2023 to just one in 2024.

The scarcity of mega deals has contributed to the overall reduction in deal values for the region. However, quarter-on-quarter, value has built momentum as the year progressed, with £1.1bn-worth of deals announced in Q1, £4.8bn in Q2, and £6.8bn in Q3.

Drilling down, while corporate acquirors have stepped back slightly so far this year, with a 12% fall in acquisition volume, development capital deals were on the up, increasing by 26% to 110 deals.

Management buyouts and employee buyouts have remained relatively stable, with 27 and 15 deals, respectively, compared with 28 and 15 in 2023.

Additionally, flotations have made a welcome return, with two deals recorded, including the planned listing of Liverpool-based Applied Nutrition. The North West accounted for approximately 14% of all UK transactions by volume so far this year, while contributing around six per cent of total deal value.

Quarter three marked the first mega deal for the North West in 2024, with Spanish energy company Iberdrola agreeing to acquire 88% of Electricity North West, the Stockport-based owner of the electricity distribution network for North West England.

The transaction, valued at €2.5bn in equity, places the total value of the company, including debt, at approximately €5bn.

In April, Bury-based JD Sports Fashion, the sports and leisurewear retailer, announced a cross-border acquisition of Hibbett Sports, an operator of athletic specialty stores in the USA, for £887m.

Additionally, Dechra Pharmaceuticals, the Northwich-based manufacturer and supplier of veterinary pharmaceuticals and a portfolio company of EQT, agreed to acquire the US company Invetx.

Invetx develops novel, protein-based animal health therapeutics aimed at transforming standards of care in veterinary medicine. The total consideration for this acquisition is $520m on a cashfree and debt-free basis.

In another significant transaction valued at half a billion pounds, Altrincham-based Assura, a public investor in primary healthcare properties, reached an agreement with Canadian company NorthWest Healthcare Properties Real Estate Investment to acquire its entire UK portfolio of 14 fully operational private hospitals.

Most sectors in the North West experienced a reduction in volume, reflecting subdued deal activity across the region.

The largest sector in terms of M&A activity was professional services, with 163 deals valued at £2.4bn. While this represented an 8.4% decline in volume, there was a notable 70% surge in value.

The reduction in wholesale and retail transactions was more pronounced, with volume falling by 18% to 143 deals worth £2.9bn. In the previous year, this sector had been the most valuable at £13.8bn, driven by several mega and large transactions.

Manufacturing maintained consistent results compared with the first three quarters of 2023, with 131 deals last year and 132 so far this year.

However, this stability in volume was not reflected in value, which diminished by 70%. The health sector, responsible for a relatively small portion of the overall market, saw the volume of M&A deals rise by eight per cent to a total of 70 transactions, valued at £118m, while the arts and entertainment sector, although an even smaller segment of the North West’s M&A activity, saw volume rise by 12.5% to 18 deals valued at £13m.

In line with the previously announced increase in development capital deals, the volume of venture capital-funded transactions rose by 7.4% to 116 transactions so far in 2024.

However, the value of these deals dropped by 56%, from £5.1bn to £2.2bn, indicating that while investments are still being made, their value has decreased.

One of the largest investors in the region was the Business Growth Fund, which supported five different companies.

An even more positive sign of renewed confidence in the region is the strong return of bank debt as a source of funding, which increased by 12.7% to 71 transactions in 2024.

ThinCats surpassed HSBC with 12 transactions in the first nine months of the year, compared with 11 for HSBC, which was the most active provider at the midpoint of the year.

The total value of transactions funded by debt, similar to private equity, has reduced from £5.3bn to £1.3bn. However, this may be due to a reluctance to disclose deal values rather than an  actual reduction in the total amount.

Napthens Solicitors was the top legal advisor during the period, moving up from third spot previously, with 34 deals. Former top dog, Addleshaw Goddard, slipped to third with 25 deals.

K3 Capital Group was the top financial advisor, working on 35 deals which helped it retain its position at the head of the rankings.

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