Private equity buyout market ‘most active outside London’
THE North West private equity buyout market remained the most active outside of London and the South East in 2016, despite the slowdown in deal activity amidst the Brexit vote and the US election, according to the Centre for Management Buyout Research (CMBOR).
The research, sponsored by Equistone Partners Europe and Investec Specialist Bank, revealed that 19 deals have been completed in the region over the course of 2016. This is higher than Yorkshire, the South West and the Midlands.
In total, private equity houses have invested £523m in the North West in 2016, giving an average deal value of £27.5m.
While the figure represents a decrease on previous years, when the region saw the completion of 28 deals worth £901m in 2015 and 32 deals worth £1.8bn in 2014, activity within certain sections of the mid-market remained resilient.
The total value of buyouts between £10m and £25m in size rose to £71m in 2016, and the value of deals within the £50-£100m bracket remained almost flat at £162m.
Andi Tomkinson, investment director at Equistone Partners Europe, said: “While the market did not react immediately, the referendum outcome has clearly had an impact on buyout activity in the North West, with the numbers reflecting a decline in the final quarter of the year.
“That said, in the North West market there are always great opportunities. It is home to a number of established private equity houses with significant amounts of capital to invest and there are a lot of a quality businesses and management teams in the mid-market space looking for funding for growth.
“Although levels have been lower than previous years, we’ve still seen some impressive deals. This shows private equity’s ability to invest through the cycle and keep putting capital to work despite a challenging macro-economic backdrop.”
Dan Sheahan at Investec said: “The mid-market has been fairly consistent. There remains a willingness to do quality deals, but not at any cost and that is encouraging.
“There are some high prices being paid, with leverage topping out at record levels, so sponsors have been using additional equity to win deals.
“This underlines sponsors’ belief in the growth prospects of those targets. Historically some of the best deals have been done in down markets and with hefty equity cushions.”
