The growth in deal activity within the Yorkshire and Humber region recorded towards the beginning of 2021 looked to have plateaued slightly in the final quarter, according to Experian’s United Kingdom and Republic of Ireland M&A Review for the year.
Deal volumes, which had been up over 28% in Q1, 46% in Q2, and 35% in Q3 2021, reached 634 for the whole year, a more modest 15% increase on a year on year basis (up from 550 deals in 2020).
However, this was the second highest number announced within the last ten years (second only to the 665 transactions recorded in 2019). The positivity in deal numbers was reflected in transaction values, which saw an exponential rise of 51% to just over £17.4bn (up from £11.5bn in the corresponding period last year). Yorkshire and Humber-based companies were involved in 9.2% of all UK deals in 2021 and contributed 5.4% to their total value.
Yorkshire & Humber’s sharp increase in deal value was fuelled by one of the region’s biggest ever deals – the largest recorded over the last decade. This saw Market Bidco, an acquisition vehicle controlled by US private equity firm Clayton, Dubilier & Rice, agree a recommended cash offer to acquire Wm Morrison Supermarkets, the Bradford-based supermarket chain. Following a highly competitive auction procedure, the bid was finalised at 287p per share, which valued the entire issued and to be issued share capital of Morrisons at approximately £7.1bn on a fully diluted basis and implied an enterprise value of £9.8bn – this has been the second largest deal recorded in the UK so far this year.
The second biggest deal of 2021 saw CBRE Group, an American commercial real estate services and investment firm, acquire Turner & Townsend Holdings, a Leeds-based provider of programme, project and cost management services, for £960m in cash.
Manufacturing remained the most active sector in the Yorkshire and Humber region with 176 transactions in 2021, ahead of professional services (168) and wholesale and retail slightly further back on 148 deals.
These sectors (wholesale and retail aside), along with infocomms, support services, financial services, construction, transport, hospitality and public administration and defence and compulsory social security all reported double-digit growth in deal volume. The education sector exceeded those numbers year on year, with triple-digit growth of 110% (from ten deals in 2020 to 21 in 2021).
In respect of transaction values, wholesale and retail (where deals worth almost £10.7bn were recorded), was the highest by industry sector. The next best was manufacturing, where the total value of deals reached nearly £2.4bn – this figure was boosted by Cargill, a US global food corporation, agreement to acquire the Performance Technologies and Industrial Chemicals (PTIC) businesses of Goole-based Croda International, in a deal worth €915m (approximately £778m). It is also important to highlight the professional services, infocomms, support services and real estate sectors, which all managed to break through the £1bn barrier for transaction value.
Where detailed funding arrangements were disclosed, a total of 62 transactions that were funded at least in part via new bank debt were recorded; down from 66 for the same period in 2020. HSBC was the region’s most active lender last year, providing funding for 12 transactions, ahead of Shawbrook Bank and Shard Credit Partners, both of which financed five deals.
Private equity has again been a prominent source of funding in the region, having been involved in 110 transactions in 2021, making it the second most common source of funding for new deals behind cash (242). The number of deals funded via private equity has increased (from 90 last year), whilst the value of those deals has risen sharply by 58%, from £7.1bn to over £11.2bn.
The Northern Powerhouse Investment Fund (NPIF), which combines funding from the UK Government, European Regional Development Fund, British Business Bank and European Investment Bank, was the lead capital investor, providing equity financing for 15 transactions.
K3 Capital Group has been the most active financial adviser for 2021, having advised on 37 transactions; marginally ahead of Grant Thornton on 36 deals, with BHP Corporate Finance in third position having been cited in 24 deals. Rothschild & Co was the lead financial adviser by value, advising on eight transactions for an aggregate consideration of just over £12bn – this included representing Morrisons in the largest deal within the region as mentioned above.
Clifford Chance was top of the legal value rankings having advised on three transactions for an aggregate consideration of £10.4bn (this included working for Clayton, Dubilier & Rice in its buy-out of Morrisons). Clarion Solicitors led the volume rankings with 46 qualifying deals, ahead of Schofield Sweeney and Squire Patton Boggs on 34 and 28 transactions, respectively.
