Mid-market private equity activity across Yorkshire held firm during H1, with 33 deals with a total value of £1.9bn taking place across the region, according to new research collated by KPMG into UK private equity activity.
The study revealed that, while deal volume was exactly the same as during the first six months of last year, the value was up £0.2bn on H1 2021, and both were up on pre-pandemic levels.
Overall, the UK exceeded historic levels of both deal volumes and values during the first half of 2022 (excluding the unusual peak in activity during 2021), compared to the same period in both 2018 and 2019.
Bolt-ons accounted for nearly two-thirds (62%) of all mid-market deals – the highest half-yearly proportion on record – due to them being viewed as a low-risk strategy to support the growth of existing platform businesses. The aggregate value of bolt-ons in H1 2022 was £12.7bn, also notably higher than the levels seen in both 2018 and 2019.
Business Services and TMT maintained the top spots in terms of sectors with the most mid-market deals, accounting for 60% of private equity investments. The ongoing trend for hybrid working and digitally enabled services encouraged this trend.
Christian Mayo, corporate finance partner at KPMG in Yorkshire, said: “It’s encouraging to see Yorkshire scale-ups continue to attract private equity investment to support the next stage of their growth journey. These latest findings are testament to the region’s buoyant mid-market and investment landscape.
“Across the board, positive mid-market activity was driven considerably by fears of a probable Capital Gains Tax increase in early April that caused dealmakers to push deals through before the anticipated change. We have also observed a growing number of business owners who de-risked their personal asset portfolios as the UK slowly emerged from the pandemic and the general outlook improved.
“Existing factors such as high inflation, the Russia-Ukraine crisis and oil price rises will persist, and these will only increase banks’ discretion and perpetuate the slowdown in the number of mid-market deals in H2. On a brighter note, once oil prices level off and interest rate rises come through, the market should pick up again.
“TMT and Business Services will continue to dominate mid-market deals for the time being. However, once inflation is back under control, the more cyclical sectors, such as Consumer and Industrials, will see a fast-paced recovery and an uptick in private equity activity as a result.
“And as ESG climbs the corporate agenda, dealmakers will be on the lookout for deals that offer an ESG angle. Due to their shortage, the multiples of these deals are likely to skyrocket as dealmakers grapple with delivering on their ESG commitments.”
