Buyout activity across the Midlands private equity industry dropped markedly in 2023, with the pendulum swinging back from the record activity levels seen in the aftermath of the post-COVID period, according to provisional full-year data (up to 1st December) from CMBOR, the Centre for Private Equity and MBO Research based at Nottingham University Business School and supported by Equistone Partners Europe.
The 28 buyouts completed in 2023, with a cumulative value of £1.2bn, represent a dramatic fall from the two highest annual values of the post-2008 period, with deals worth £5.9bn completed in 2022 and deals worth £6.1bn in 2021. This sense of an industry-wide pause is underlined by cumulative deal value not surpassing £2bn for only the third time in the last ten years and is a similar theme to that seen across the UK and Europe.
The decline in deal activity started in H2-2022, following a record 18-month period, and continued into H1-2023, where just £0.1bn worth of deals were completed in the first six months of the year. The downward trend reversed in H2-2023 with £1.1bn worth of deals completing, providing some encouragement for the year ahead.
Dealmaking within traditional sectors such as Business Services and Industrials has held comparatively steady as firms seek value and stability in an otherwise difficult market. However, TMT and Healthcare, two sectors which experienced a remarkable pandemic-era boom, have experienced major corrections, with valuations and volumes both falling notably in the region.
Will Copeland, from Equistone’s Midlands office, said: “The full extent of the decrease in Midlands buyouts was not anticipated, but we are seeing green shoots with a rise in activity in the second half of the year. There has not been a shortage of opportunities to do deals in 2023. However, transactions have faced a number of challenges which have often resulted in the timing not being right.
“Despite this, at Equistone, we’ve experienced a record year for exits in 2023, including the divestments of Acuity Knowledge Partners and Bulgin. We have a number of assets in the pipeline to exit and anticipate new investment activity will pick up across the first two quarters of 2024.
“Looking ahead to 2024, this sentiment is echoed with Corporate Finance advisors having healthy lists of Midlands mandates, and the slowdown in private equity and debt deployment over the last 12-18 months could cycle to an increased urge for new investment and exit activity, potentially at reset valuation expectations compared to the post-covid boom.”
