Yorkshire bucks deal trend

MERGERS and acquisitions (M&A) activity may still be depressed across the UK but Yorkshire has seen a rise in deal numbers.

Reports by business advisory firm Grant Thornton and Experian Corpfin paint a mixed picture for the deals sector.

Experian’s analysis of the latest figures found that the UK saw a 18.1% decrease in M&A activity quarter on quarter with transactions only rising 4.5% to £68.9bn.

However, there were 77 transactions in Yorkshire during quarter one – an increase of 28% on the previous quarter.

Moreover, deal values registered a 100% increase to £531.9m. Deals in Yorkshire accounted for 8.3% of all UK deals in terms of volume.

DLA Piper was the most active legal advisor in the region in terms of volume, having worked on five transactions. PricewaterhouseCoopers and Grant Thornton topped the list of financial advisors by volume, both working on three transactions.

The quarter witnessed two £100m plus deals totalling £250m. One was the flotation of York-based CPP on the London Stock Exchange. The other was the acquisition by private equity firm Phoenix Equity Partners of Leeds-based Andrew Page.

In the mid-cap range (deals from £10 to £100m) deal volume increased from seven to eight announced transactions from quarter four 2009 to the first quarter 2010.

The value of the mid-range deals increased by 3% from £235.97m in quarter four 2009 to £243.06m in quarter one 2010.

The largest mid-cap deal in Yorkshire in the last quarter value was the acquisition by Stratford-based The National Farmers Union Mutual Insurance Society of No 1 Whitehall Riverside, a Leeds-based office building, from London & Standard Property,a Guernsey-based closed-end property investment company, for a consideration of £51.3m.

Small deals in the first quarter of 2010 accounted for 67 announced transactions in Yorkshire – an increase of 26.42% on the previous quarter’s 53 deals.

Deal values in the small-cap range increased by 32.25% from £29.43m to £38.92m from quarter four 2009 to the last quarter.

The largest of the small-cap deals in Yorkshire saw IVRCL Infrastructures and Projects, an Indian-based engineering and construction company, acquire Sheffield-based DavyMarkham, a designer and manufacturer of engineering components and assemblies, for £9.5m.

Wendy Smith, business development manager at Experian Corpfin, said: “The fact that the Yorkshire region has bucked the national trend with a significant increase in the volume of deals at the start of 2010 shows that funding for good quality risk free businesses is available.

“However, the overall figures for the UK tell us that the market is still very fragile. Although in some cases funding has been available where good quality businesses have been involved, there is a still a funding gap and this is proving to be the main obstacle to getting the deals off the ground.”

According to Grant Thornton’s analysis the first quarter of 2010 saw 524 mergers worth around £13.6bn representing a 14% decrease in the number of deals and a 22% drop in value compared to quarter four 2009 when 610 transactions worth £17.5bn were recorded.

Year-on-year, the latest results are 6% higher in terms of the number of deals but 68% lower in terms of total value.

Ian Marwood, head of corporate finance at Granth Thornton in Yorkshire, said that the drop was partly due to fewer ‘mega’ deals.

Figures show that the last quarter saw a 21% decline in the number of buy-outs to 42 private equity deals worth £2.4bn compared to the final quarter of 2009.

In terms of value, almost 40% of the total private equity value for 2010 stems from the £955 million-bid for Pets At Home by Kohlberg Kravis Roberts & Co.

However, the number of private equity transcations increased by around a third year-on-year with financial sponsors backing 332 deals with a deal value of £379m.

Despite the devaluation of sterling the number of foreign acquisitions of UK targets has not picked up significantly.

The first quarter recorded 162 foreign acquisitions of UK targets with a total value of about £6bn.

This compares positively to the first quarter of 2009, when only 130 such deals worth £921m were recorded, but is below both the average of recent years and the fourth quarter 2009 (186 foreign acquisitions, total value £13.3bn).

Mr Marwood added: “We have seen an increase in interest by overseas buyers particularly from the US and Europe and are about to complete such a deal. It is hard to tell whether this interest will translate to a renaissance of cross-border deals.”