Appetite for private equity investment on the up in the Midlands

Appetite for private equity investment in the Midlands is on the up, with the number of PE-backed deals increasing 28% in the last two years, according to new research by accountancy and business advisory firm BDO.

The Midlands is now home to 170 PE-backed businesses, with more than 90 different PE houses having investments in the region. The Business Growth Fund and Lloyds Development Capital are the most prolific investors, holding 21 and 13 investments in the region respectively.

Manufacturing is the most popular sector for PE investment, representing 54 of the 170 companies. However, it was biotech and healthcare which saw the highest number of PE deals in the region last year.

Despite increasing deal activity, the Midlands is still lagging behind other parts of the UK, with only one PE-backed company for every 3,570 businesses. This compares to one for every 1,761 businesses in London and 2,682 in Scotland.

The inaugural Midlands Private Equity Growth Barometer, published today by BDO, has also revealed the top 50 fastest-growing PE-backed businesses in the region, with SDL Property Services Group, Panther Warehousing and Edenhouse Solutions topping the list with turnover growth of 69%, 40% and 38% respectively.

Given the region’s heritage, it is not surprising that manufacturing features strongly, representing 11 businesses in the top 50. Support services (10) and technology and media (7) are the next most popular sectors for investment.

Geographically, the fastest growing PE-backed businesses are split relatively evenly across the East (56%) and West Midlands (44%).

Andrew Mair, partner at BDO and author of the report, said: “In the last two years the top 50 businesses have grown revenues significantly, employing an additional 10,000 people in the region and contributing to the health of the Midlands economy.

“It is clear from our analysis that private equity investment provides businesses with the support to exploit the growth opportunities, which benefit the businesses involved, their workforce and the economy as a whole.

“With so many entrepreneurial, innovative companies in the region – and with a best-in-class PE community that has the appetite to invest – I am confident we will see both the volume and value of investments increase over the next few years.”

Nottingham’s SDL Group was named the fastest growing private equity backed business in the Midlands.

The Chilwell-based property specialist took the top spot in the 2018 Private Equity Growth Barometer with an average growth rate of 69 per cent.

Commenting on the Private Equity Growth Barometer, SDL Group’s chief financial officer, Colin Anderton said: “This is a major achievement for the Group and really demonstrates the strength of our people and services.

“Our growth has come from our ability to adapt and identify new opportunities in what has been a challenging economic and political climate. In 2016, we acquired the prominent auction specialists CP Bigwood and Graham Penny, and we also launched our own Auction Partners network, capitalising on what we see as the growing mainstream popularity of auctions.

“Our Property Partners franchise scheme for property management has also been a big success and recently celebrated its first birthday.

“Organic growth remains a key focus for us in 2019. We will be continuing to place our customers at the heart of every decision we make, with the aim of revolutionising their experience of property services.”

Andrew Mair, added: “We are delighted to have recognised SDL as the fast growing PE-backed business in our 2018 private equity growth barometer and hope that they continue to thrive through 2019 and beyond.”