Mega-deal dip impacts Midlands M&A market

The Midlands’ M&A market struggled to match the record levels seen in 2022, but still significantly outperformed other regions in the UK.

In an M&A report released by Experian, 1,042 deals were completed in 2023, a 7% decline from the previous year, with the Midlands impacted by a fall in both the large and mega-deal segment. It sits 74% lower than the £28bn worth of transactions announced in 2022, at £7.2bn. 

The Midlands was yet again the UK’s busiest region for deal making outside of London and the South East, with a Midlands element in 15% of all UK transactions by volume this year. Its firms contributed around 4% of total deal value.

Public companies in the region turned to rights issues as a method to raise funds in 2023, with 13 transactions valued at £1.3bn. This included the Midlands’ largest deal of the year, the £1bn share issue by Severn Trent and two large share issues by Hummingbird Resources. 

The Midlands’ largest transaction, however, was the £910m investor buy-out by iCON Infrastructure of Alliance Medical Group in Warwick, a provider of diagnostic imaging services, from South Africa-based Life Healthcare Group, an owner and operator of private hospitals.

Phoenix Asset Management Partners’ £789m cash offer to acquire funeral services business Dignity was another invest buy-out that was amongst the largest deal of the year.

In September, Conigital, a developer of driverless vehicle technology, secured £500m in Series A+ funding – the largest ever funding round for a Midlands firm. This was a combination of equity and debt and part of a partnership with an undisclosed global private equity infrastructure firm and reveals the rapid growth of Conigital, which raised just £1m in seed funding in 2020.

Completing the top five deals of the year was Lithia UK Holdings, a subsidiary of Lithia Motors, taking over Pendragon’s retail brands in the UK for £367m.

Harrison Clark Rickerbys led the legal advisor rankings for another year with 67 deals, Higgs came from fourth in 2022 to second in 2023 with 61 deals and Addleshaw Goddard took the third spot with 46 deals after it was eighth last year. 

K3 Capital sealed the top spot again in the financial advisor rankings with 82 deals, Grant Thornton remained second sith 30 and RSM went up a place to third with 29 deals. 

The most active sector in terms of volume in the Midlands was manufacturing, with a total of 282 transactions worth £1.1bn.

Aggregate Industries of Markfield was the most active bidder, the manufacturer and supplier of a wide range of heavy building materials to the construction industry is a subsidiary of Swiss conglomerate Holcim. 

In total Aggregate Industries acquired four companies throughout 2023; Sivyer Logistics, Besblock, OCL Regeneration and Eco-Readymix, cementing its position as one of the Midlands biggest M&A players in the manufacturing sector. 

Whilst most sectors saw a downturn in volume, wholesale and retail deals increased by 4% to 273 transactions, worth £1.7bn. Retail groups Next and Frasers had 17 transactions between them, worth more than £1.5bn. 

Bank debt-funded transactions dropped by 17% to under 100 deals. The most active financier was HSBC which completed 15 deals, the largest being an £18m funding package in support of the £20m acquisition of Hireway Rentals, Scotland, by Reflex Vehicle Hire, Loughborough-based provider of commercial vehicle rental services.

Midlands Engine Investment Fund was the most active investor in the region with 13 transactions, while Business Growth Fund was second with seven transactions during 2023. 

With the upturn in both investor buy-outs and development capital transactions, the number of deals funded by private equity in 2023 was up by 3% year on year, to 151 deals – representing the most active year for private equity activity since 2018.