Yorkshire Deal Review

By James Croxen, director, Clearwater International

As the UK’s COVID-19 vaccine programme gathers pace and the roadmap out of lockdown looks set to be on track for June, investor confidence remains unrattled with strong deal activity taking place in Yorkshire in 2021.

Despite the UK entering another national lockdown at the turn of the year, there were still over 30 transactions completed during February involving companies based in the region. Over 50% of these deals involved private equity (PE), which remains a key driver of local M&A activity alongside acquisitive Plc’s. Although the changes to capital gains tax in March did not materialise as suspected, this was a key consideration for many business owners and contributed to the buoyant market conditions at the start of the year.

The most notable deal in February was the £6.8bn acquisition of Asda from US owner Walmart by the Issa Brothers, who own EG Group, and PE firm TDR Capital. The deal is still subject to regulatory approval from the Competition and Markets Authority which is expected in Q2 of 2021.

Technology activity accelerates

Technology deal flow remains strong in 2021 as demonstrated by the acquisition of Leeds-headquartered cloud and digital transformation consultancy Infinity Works by US-based Accenture Plc, in a deal led by Clearwater International. The transaction is a real Yorkshire technology success story for the business, which was founded in Leeds in 2014. The transaction provides a successful exit for PE firm GCP, who initially invested two years ago and demonstrates there is a strong appetite from the US for good quality UK assets with this being Accenture’s second UK acquisition this year, following the purchase of SAP-services business Edenhouse.

Another significant technology deal was the £75m investment from Great Hill Partners into BigChange, the Leeds-based mobile workforce technology company. BigChange’s managers, led by founder and CEO Martin Port, will retain a significant minority stake in the company and will continue to lead the business as it moves into the next phase of development. The company, which is now valued at £100m, has experienced a 50% average year-on-year revenue growth since its inception in 2013.

Industrial appetite remains resilient

The resilience of the local industrials sector is demonstrated by another active month of M&A, with Cabot Square Capital acquiring a majority shareholding in £10m EBITDA, Yorkshire-based offsite construction specialist Premier Modular for an undisclosed sum. The investment comes off the back of it securing a significant contract to provide modular buildings for COVID-19 testing in the UK.

South Yorkshire manufacturer Polypipe Group made a double acquisition in February acquiring LDC-backed ADEY and Nu-Heat for £210m and £27m respectively. Gloucester-based ADEY provides magnetic filters and chemical products, which improve the performance of water-based heating systems, with reported underlying EBITDA of £18m the acquisition represents a multiple of c.12x EBITDA. Devon-based Nu-Heat is a leading supplier of sustainable underfloor heating solutions and renewable heating systems which delivered an EBITDA of £3.1m with the acquisition representing a multiple of c.9x EBITDA.

In addition to these deals, Severfield Plc acquired Driffield-based steel fabrication business DAM Structures, LDC-backed Pelsis continued its international expansion with the acquisition of French business Edialux France, Foresight Group invested £4.5m into the Hull-based fire protection business iMist, and Wakefield-based Horizon Platforms moved to employee ownership.

Business services stays strong

PE investment has remained buoyant throughout the month as Equistone Partners invested in Leeds-based global supply chain management provider Ligentia and Palatine-backed business Construction Testing Solutions acquired consultancy and testing business Nicholls Colton Group for an undisclosed sum as the business continues its acquisition strategy.

Independent financial planning and asset management firm Progeny acquired Leeds-based law firm, Watsons Law in a deal that will add expert real estate conveyancing to the firm’s existing professional services proposition.

The other notable business services transaction was Biffa Plc’s £82.5m acquisition of Barnsley-based food waste business Company Shop, which reinforces that acquisitive Plc’s are driving deal activity across the region as well as PE.

M&A activity is expected to continue to gain momentum and confidence throughout 2021 as Yorkshire businesses show resilience in the market and appear attractive to investors both locally and overseas.