UK deal values spike in H2 2013

A study shows lower mid-market buyout values in the UK rose sharply during the second half of 2013.

The combined value of lower mid-market buyouts in the UK reached £1.84 billion (€2.2 billion; $3.1 billion) during the second half of 2013, representing a 68 percent increase compared to the first six months of the year and more than a 50 percent increase compared to the same period in 2012, according to new research from by Lyceum Capital and Cass Business School.

While the number of buyouts during the period grew slightly – from 36 to 42 – the combined value of deals rose to the highest six-month total since the first half of 2011. The study looked at private equity control deals in the £10 million to £100 million enterprise value range. The total number of buyouts in 2013 dipped from 81 to 78 in 2012, while the combined value of deals rose 10 percent, to £2.94 billion.  

“The £10 million to £100 million value bracket has again demonstrated its attractiveness as a home for capital looking to back growing, entrepreneurial businesses that are at the heart of the UK economy,” said Andrew Aylwin, a partner at Lyceum Capital, in the statement. “This counter-trend growth is exactly the reason why well-established firms have been able to raise new funds, attracting billions of pounds of foreign investment into the UK.”

A number of UK lower mid-market firms have successfully raised capital recently, including August Equity, which closed on its £200 million hard-cap earlier this month, and Synova Capital, which closed its oversubscribed fund in August on its £110 million hard-cap after less than three months in market. Meanwhile, Primary Capital, another UK lower-mid market firm, is expected to hold a £225 million final close in February after coming to market in November 2013. 

UK exit values in 2013 also grew year-on-year, rising 30 percent to £1.92 billion, while the number of portfolio company sales rose slightly from 40 in 2012 to 43 last year, “suggesting a renewed willingness amongst large corporates in Europe to invest to acquire the right UK businesses as economic conditions improve”, Scott Moeller, professor of finance at Cass Business School, said in the statement.

In terms of sectors, industrial companies attracted more buyouts than businesses in any other sector last year: 27 compared to 22 in 2012. Retail and consumer was the second most popular sector for investment, while the dining, sport and leisure, and travel sub-sectors all demonstrated  “renewed interest”, according to the study.

For a more in-depth look at the wider UK market, be sure to check out the UK country report in PEI’s February issue.