Midland deals still being made despite EU shock

THE number of private equitybacked management buyout/ buy-ins in the Midlands dipped only slightly in 2016 against 2015, despite the anticipated slowdown in deal activity ahead of the EU referendum in June.

Preliminary figures for 2016 show ed there were 28 private equitybacked deals in the combined East and West Midlands region, compared to 31 in 2015. The West Midlands recorded 13 deals (15 in 2015) and the East Midlands, 15 (16).

The figures are based on the latest data from the Centre for Management Buyout Research (CMBOR), sponsored by Equistone Partners Europe Limited and Investec Specialist Bank.

The total value of all private equity-backed deals stood at £848 million across both East and West Midlands giving an average deal value of £30.3 million.

However, there were contrasts between East and West Midlands. The average deal value in the West Midlands was £31.4 million in 2016, down slightly from £32 million in 2015. In the East Midlands, the average deal value was £29.3 million – down from £81.9 million in 2015.

That average was, however, lifted by the £555 million public to private deal of Infinis, the renewable energy company, in October 2015.

The CMBOR figures also show a decline in the number of deals across the year. In the West Midlands, there were eight deals recorded in the first half of 2016 compared to five in the second half.

In the East Midlands, there were nine deals in the first half of 2016 compared to six in the second half.

Nationally, there were 174 deals recorded in 2016 compared to 217 in 2015. The average deal value was down at £57.4 million compared to £95.1 million in 2015. There were 96 deals in the first half of 2016 compared to 78 in the second half.

Across Europe, year-on-year activity was down 38 per cent from €89.7 billion in 2015 to €55.7 billion in 2016. The fall was more marked in the UK, where overall activity plum- meted from €28.7 billion last year to €12.5 billion this year, the lowest level of buyout activity since 2009.

“The Midlands has held up remarkably well despite the uncertainty both before and after the referendum,” said Paul Harper, partner at Equistone Partners Europe’s Birmingham office. “But it is the megadeals that have declined most in the wake of the Brexit vote.

“The mid-market, which is more representative of the Midlands, has been more consistent and this has been the case both in UK and mainland Europe where a number of countries have recorded increases in activity levels. This is a good demonstration of private equity’s ability to persevere and keep putting capital to work despite a challenging macroeconomic backdrop.”

Mr Harper said that fundraising suggested that 2017 could see activity resume. In addition to a number of mid-market firms raising fresh pools of capital, four large buyout funds raised €33 billion between them in 2016 to back large deals. CMBOR already has nine pencilled in for possible 2017 completion, worth a combined €18.5 billion.

The Midlands has held up remarkably well despite the uncertainty both before and after the referendum Paul Harper, above