Deal activity remains strong in Northern private equity market despite reduced values
Date published: 29 December 2018
Sebastien Leusch, Investment Director at Equistone Partners Europe’s Manchester office
Buyout volumes in the Northern private equity market remained strong in 2018, despite a £6.6bn reduction in values following a record 2017 in which the region completed a number of mega-deals.
The latest data from the Centre for Management Buyout Research (CMBOR) at Imperial College Business School, sponsored by Equistone Partners Europe and Investec Corporate and Investment Banking, show that Northern deal values totalled £2.39bn from 36 deals in 2018. This falls short of last year, when regional values surpassed the capital to reach their highest levels since the recession at £8.99bn from 49 deals.
This was with the support of two mega-deals, transacted in the North East and North West regions. They were Epiris’ sale of North East headquartered Parkdean Resorts to Onex Corporation for £1.35bn, and the sale of Manchester smart metering financing firm Calvin Capital to KKR for £1bn.
Comparatively, the largest deals transacted in the North in 2018 included the £700m sale of York-based veterinary services group VetPartners, the sale of TPG Capital’s stake in UK-based mattress foam supplier, Vita Group, at an estimated value of £338m, and Equistone’s sale of travel company Travel Counsellors to Vitruvian at an estimated value of £250m.
While total buyout values fell, the value of deals in the mid-market (EV £100m - £500m) grew, with deals totalling £1.355bn in 2018 in comparison to £946m in 2017. There was also a continuation in the value of deals completed in the North’s small buyout market (EV < £10m), with the number of deals increasing from 15 in 2017 to 17 in 2018.
The data also demonstrated an uptick in the value of TMT buyouts, which were the highest since 2014 at £365m this year in comparison to £74m in 2017.
Sebastien Leusch, Investment Director at Equistone Partners Europe’s Manchester office, said: “Following an exceptionally strong year and a continuation of market uncertainty, it is perhaps unsurprising that there has been a fall in deal values in 2018.
“We are, however, encouraged to see continued levels of activity despite these factors, evidenced by the total volume of buyouts remaining strong and an increase in value of deals in the mid-market as well as greater activity within certain markets.
“Emerging sectors such as TMT have benefited from further investment, as the North established itself as a hub for these companies to grow and attract investment. Activity in the mid-market and small buyout market is also cause for optimism, with a steady supply of Brexit-resilient Northern businesses continuing to attract investment against a background of turbulent market conditions.”
Christian Hess, Head of the Financial Sponsor Transaction Group at Investec, said: “After an exceptional 2017, UK deal activity is showing the effect of Brexit uncertainty. However, the silver linings are there to see if you look for them.
“Compared to the turbulence of public markets, the UK private equity drop is actually relatively small, highlighting a certain robustness in private markets. Values have fallen sharply but volumes are only down five per cent year-on-year in 2018. Given the very public travails of the UK political environment right now, that actually looks like quite a solid performance with the flight to quality that you would expect.
“When macroeconomic uncertainties ease, we would expect an uptick because the conditions in the UK are otherwise amenable in terms of availability of equity and debt capital and demand for funding.”
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