Positive outlook for North West private equity and venture capital sector

What’s the outlook for the North West private equity and venture capital sector? navigating choppy waters

The offices of K3 Advantage in Manchester played host to a roundtable of leading private equity and venture capital professionals, all with a keen eye on the opportunities in the North West. As the group gathered on a chilly winter morning, it was clear that the market conditions had shifted significantly since the initial invitations were sent out.

Having established that business confidence has taken a bit of a hit following the October budget, on top of the speculation leading up to it, the resulting National Insurance and minimum wage increases have had an obvious effect on how businesses are valued and therefore how deals are structured.

This sentiment was echoed around the table, with the participants painting a picture of a market in flux. Josh Bean of BGF highlighted the impact of economic factors on different sectors, with low-paid industries like retail, hospitality and care facing significant margin erosion. “There’s a lot of nervousness around future budget changes and the impact on capital gains,” he explained. “Founders are still considering their options, and that’s translating to a slower market.”

The need for adaptability was a common thread. Rachel Taplin of Palatine Impact Fund acknowledged the challenges, but remained optimistic: “We’re seeing a shift towards more direct origination, as opposed to advisor-led deals. Founders are aligning with our values and we’re able to build strong connections.”

Pete Barkley of Westbridge noted that his firm’s focus had shifted towards bolt-on acquisitions to complement existing portfolio companies. “We’re finding that businesses are looking for high-quality partnerships, where we can take on the strain of running the central functions so they can focus on what they do best.”

The participants acknowledged the challenges, but remained optimistic about the opportunities in the region. Guy Weaver of Praetura Ventures pointed to the impact of changes in EIS and VCT subscription rates, noting that “it provides us with more firepower here in the North West. We’re able to invest earlier, and that pipeline will be the businesses that everyone here will be backing in five to ten years’ time.”

Laura Wiggins of YFM highlighted the success of their recent fundraising efforts. “We’ve had a great year on the venture capital side, and we’re really pleased with the result. Part of that is a function of the wider market dynamics, but it’s also a testament to having a consistent strategy.”

The need for data-driven decision making was a recurring theme. Sam Phillips of K3 Advantage emphasised the importance of early planning for exit readiness. “We’re really trying to push the idea of a data strategy from day one. If businesses can articulate their story through the data, it makes the due diligence process so much smoother.”

This sentiment was shared by Alexandra Stewart of the Knight corporate finance team, who noted that the increased scrutiny on deal risk was driving a shift in mindset. “It’s not just about top-line growth anymore. Businesses need to prove their profitability and demonstrate how they’re adapting to the new challenges.”

The participants also discussed the changing landscape of buyers, with Ryan Bevington of Maven Capital Partners highlighting the growing presence of American private equity firms. “We’re seeing them pay significantly more than their UK counterparts, which is a bit concerning from a long-term perspective. But when the valuation differential is so stark, it’s hard to ignore.”

Despite the challenges, the group remained optimistic about the outlook for 2025. Claire Alvarez of Foresight Group pointed to the firm’s successful exits, noting the mix of buyers they’ve encountered. “We’ve had some really good exits, and we’ve got some in the pipeline that we’re excited about. It’s a real mix – mid-to-larger cap private equity, trade buyers, both domestic and overseas.”

The role of technology and data analytics was a topic of keen interest, with participants discussing the potential impact of AI tools. Mark Lyons of Puma highlighted the operational efficiencies, noting that “it’s giving us time back to focus on more value-add things we could be doing with our days.”

Richard Williams of TDC, a debt provider that works closely with many private equity sponsors, emphasised the need for a sophisticated approach, with the firm recruiting a dedicated data specialist to explore the opportunities. “We know there’s an efficiency there, rather than people keying in data and manual input. We’re on that journey, and we know it’s going to be really meaningful.”

As the discussion drew to a close, Paul Billingham of Knight Corporate Finance reiterated a desire from Knight to work more closely with the private equity community. “We’ve traditionally been very tech-focused, but we recognise the incredible talent and opportunity in this room. We’re excited to explore new ways of collaborating and helping to unlock value in the North West.”

The participants all seemed to exude a sense of optimism, tempered by the realisation that the path ahead would not be an easy one. But as Guy Weaver of Praetura Ventures noted, “There’s always going to be good times and tough times. Maybe this is slightly tougher than it has been. But that’s where the tenacity and optimism of the region’s business leaders will shine through.”

With a focus on data-driven decision making, adaptable investment strategies, and a commitment to collaboration, the private equity and venture capital community in the North West appears poised to navigate the choppy waters ahead and capitalise on the opportunities that 2025 may bring.