Monday, April 15, 2024

Midlands PE-backed mid-market businesses saw average 51% EBITDA growth over three years

Midlands private equity-backed businesses experienced average EBITDA* growth of 51% over the latest three-year period, underlining the positive impact that the sector is having on the region’s economy, according to a new report.

The inaugural Private Equity Value Report from Real Deals, developed in association with BDO, found that the region performed slightly below the UK average. Nationally, growing PE portfolio companies achieved an average EBITDA increase of 58.9% over the same three-year period while average revenues grew by 22.2%.

Accountancy and business advisory firm BDO commissioned the research to understand the impact that private equity investment is having on the growth of the regional economy. The data was drawn from the most recent three years of accounts filed with Companies House.

The fastest growing 25 businesses in the Midlands saw average EBITDA growth of an impressive 90% over three years and included a range of businesses from the East and West Midlands, such as: Kindred Education Limited in Northampton, Nottingham-based Care Fertility Group and M&J Evans Construction in Walsall.

The top 25 showcased a range of sectors from technology to travel and manufacturing and the most featured investors in the region were Bridgepoint, CBPE Capital and BGF.

Steve Round, partner at BDO LLP, said: “Despite the challenges of the past three years, this research demonstrates PE-backed businesses are a resilient and dynamic segment of the region’s economy.

“There’s often a focus on the level of deal activity and headlines around exits but we should also celebrate the value created by investors and management teams working hard to deliver against their growth plans.”

The fastest-growing PE-backed businesses in the region created an additional 878 jobs between 2020 and 2022.

BDO’s latest bi-monthly Economic Engine survey of 500 mid-sized businesses revealed that 37% of Midlands businesses are either currently looking for private equity investment or will do so in the next three months. Whereas, 48% shared they wouldn’t consider PE-backing with the biggest barriers cited as not knowing how to engage the right adviser or business owners favouring a trade sale with no requirement to be involved post-deal.

Steve added: “Private equity investment can be a real force for good as this growth also fuels innovation and job creation in the Midlands. Looking ahead, there’s a significant opportunity for the region which is home to so many high-quality businesses.

“Investors have the capital and appetite to back more entrepreneurs to scale up and we have the experience to support business owners and PE houses on that journey.”

*EBITDA stands for earnings before interest, taxes, depreciation and amortisation.

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