UK lower mid-market deals down 12% in 2012

Deal volume in the £10-£100m value range fell last year – but still accounted for almost half of UK buyout activity, thanks to a resurgence in consumer and TMT investments.

The UK Growth Buyout Dashboard, a report published by London-based Lyceum Capital and Cass Business School, recorded 79 private equity control deals within the £10 million (€11.88 million, $15.83 million) to £100 million (€118.88 million, $158.29 million) enterprise value range – equating to 45 percent of all UK buyout deals last year by volume, based on Dealogic figures.

Activity levels went backwards last year – deal volume was down 12 percent compared to 2011 – but remain well above the trough years of 2009 and 2010, when there were just 34 and 67 deals respectively.

Sectors where the UK has a strong competitive edge – such as IT and software development – fared particularly well, according to Andrew Aylwin, a partner at Lyceum Capital. Support services and technology, media and telecoms (TMT) were among last year’s highest performers, recording 19 and 18 transactions respectively. 

The most popular sector, however, was consumer and retail, with six deals in the last quarter alone. It totalled 22 deals in 2012, a notable improvement on the 14 deals recorded in 2011. 

“The high number of retail and consumer deals completed last year reflects appetite from turnaround specialists to acquire distressed assets in the sector, which has been hit hard by falling consumer confidence,” said Scott Moeller, professor in the practice of Finance at Cass Business School, in a statement

Transactions in the lower end of the segment predominated: there were 66 deals completed within the £10-£50 million  bracket in 2012, compared to 13 in the £51-£100 million range. 

There were 37 lower mid-market exits in the whole of 2012. In the fourth quarter, the eight exits recorded were split evenly between secondary buyouts and trade sales. 

“The lower mid-market performed robustly during 2012 despite a challenging macroeconomic environment,” Aylwin told Private Equity International.

He expects this to continue into 2013. “Whilst larger companies remain exposed to volatile macroeconomic and market conditions, there remain significant opportunities in the lower mid-market segment for potential buyers. Young, fast-growing businesses continue to seek the expansion capital and expertise private equity firms have to offer.”