The West Midlands has seen the highest number of management buy-out deals since 2011 – and the highest average deal value since 2007.
There were 22 deals in 2017 in the region – up from 14 in 2016 – with average value tripling that of 2016, up from £36.9m last year to £119.5m in 2017. The total value at £2.6 billion is the third highest since records began in 1985. This was however skewed somewhat by one large transaction worth nearly £2 billion.
The preliminary figures are based on data published by the CMBOR at Imperial College Business School, sponsored by Equistone Partners Europe and Investec Specialist Bank.
The figures reveal that there were 16 buy-ins compared with six buy-outs – reflecting a trend set since 2005 where the number of buy-ins has consistently exceeded the number of buy-outs. High-profile deals in the West Midlands included the acquisition of Punch Taverns by Patron Capital in a deal valued at £1.8bn, the purchase of Kidderminster-based Brintons Carpets by Argand Partners and Equistone Partners Europe’s majority investment in Birmingham-based technology-led marketing company Inspired Thinking Group.
Manufacturing once again dominated the field with eight deals in 2017 (up from six in 2016) followed by four deals in TMT (technology, media and telecommunications) and three deals in business and support services. Reflecting the Punch Taverns transaction, leisure had the highest sector value with manufacturing coming in second at nearly £500m. Nationally, there were 181 deals recorded in 2017 – down from 188 in 2016 but with deal values near doubling from £11.8bn to £23.8bn in 2017. Average deal sizes were up at £131.5m – back to their 2007 peak. The second half of 2017 was particularly strong.
“The Midlands has had an excellent year and whilst it was dominated by a single deal approaching £2bn the core market up to £100m was particularly buoyant, with 19 of the 22 deals in that bracket,” said Phil Griesbach, partner at Equistone Partners Europe’s Birmingham office.
“We have had a busy time since the summer and expect 2018 to pick up where 2017 ended, with a good number of quality businesses expected to come to the market.”
Dan Sheahan at Investec said: “The uptick in activity is likely down to a ‘back-to-business mentality’ as investors have had 18 months to get comfortable with a new European backdrop.
Dan continued: “The run-up to and particularly the period following the UK’s Brexit vote saw investors pause and deals delayed, but the beginning of this year saw significant fundraising announced and strong deal activity coming through, some of which may have been pent-up from the Referendum aftermath. Our pipeline is currently fuller than it has been for two years.
With leverage readily available and high-quality assets coming to market as vendors gain confidence to put their assets on the block, we are confident this strong buyout activity will continue through next year.”
The West Midlands saw a small decline in the number of exits from 17 in 2016 to 14 in 2017. However, the total value nearly doubled – up from £733m in 2016 to £1.3 billion in 2017, reflecting the national and European trend. Secondary buy-outs were the most popular exit route with nine deals recorded in 2017. However, trade sales were down from nine in 2016 to four in 2017.
Phil Griesbach said that general activity had probably been fuelled by mid-market firms raising fresh pools of capital.
“Despite fears of Brexit and a snap General Election, deals have continued to come through and business has remained largely undeterred,” said Phil.
