Dealmakers: Equity on the rise

The value of private equity deals in the North West’s mid-market sector has seen a dramatic 22 per cent rise in 12 months, according to new research.

And that’s good news for Lancashire. Market watchers and commentators believe the high levels of equity capital chasing a limited number of investment opportunities in the region is good news for county-based businesses.

The study of equity investments shows a total of 14 North West deals worth £1.33bn in the first quarter of 2019 up from £1.09bn and 15 deals in Q1 2018.

The report from KPMG, also suggests investment appetite in the regions mid-market increased significantly compared with the final quarter of last year, which saw 12 deals worth only £620m.

Jonathan Boyers, head of M&A at KPMG in the UK, believes the rising deal value has been driven by fierce competition for a limited number of investment opportunities.

He says: “While there is a lot of dry powder in the market, it comes as no surprise that private equity deal volumes fell slightly in the first quarter year-on-year. As the original March 29 Brexit deadline loomed large, a sense of caution kicked in and some processes were put on hold.

“Having said that, confidence certainly didnt disappear and it’s encouraging to see the North West deal value increase year-on-year and more than double quarter-on-quarter.

The report indicates that other regions are not faring so well

Commentators believe the region’s dynamic business base has made it particularly attractive to private equity investors.

Jeremy Rowe, director at Pierce Corporate Finance, says: “The report indicates that other regions are not faring so well, and I believe the North West is benefitting from private equity houses moving into the area in recent years, which has resulted in a noticeable upsurge in activity.”

This view chimes with that of Adrian Gare, corporate finance partner at FRP Advisory. He says: “The rising value of private equity deals reflects increased competition and suggests there is more investment than there are deals in the market.

“As funds accumulate more quickly than deal activity, the competition to provide funding increases. This means more choice for management teams when it comes to selecting an investment partner.”

Chris Summerscales, director at Seneca Partners, goes further, suggesting that the UK market is experiencing ‘almost an excess of private equity money at all levels, from SME investors to enormous buy-out funds.

He adds: Given that Lancashire has a wealth of high-quality businesses and management teams, it should follow that the region is ripe for private equity investment.

“The key hurdle for Lancashire businesses is getting onto the radar of the private equity funders. With most funders based in London or Manchester, partnering with an adviser that has experience in the private equity market will help generate interest.

  • To read this feature in full and access further Lancashire business news, advice and analysis subscribe to Lancashire Business View magazine or join the LBV Hub from just £2.50 per month. Click here to subscribe now.