UK lower mid-market grows

Despite fears that the UK economy is teetering on the brink of recession, the country’s lower mid-market appears to be in good health, according to Lyceum Capital in conjunction with CASS Business School.

The UK’s lower-mid-market – defined as deals in the £10 million to £100 million enterprise value range – proved robust in the face of ongoing macroeconomic turbulence last year, posting 44 percent growth in the number of transactions from 63 in 2010 to 91 last year.

The research, produced by Lyceum Capital in conjunction with CASS Business School in London  as part of the pair’s quarterly UK Growth Buyout Dashboard, showed the aggregate value of deals had also risen, from £2.2 billion in 2010 to £3.4 billion last year.

Andrew Aylwin, a partner and chief operating officer at Lyceum, told Private Equity International: “The UK lower-middle-market is the source of future British champions that will support economic recovery and long-term growth. Unsurprisingly, and in stark contrast to other segments and geographies, it has demonstrated persistent resilience in the face of strong macro-economic headwinds.

“Combined with the market’s self-replenishing pool of growing, innovative businesses, it’s a great market for investment that consistently averages about 100 new control investments a year and generates lower volatility of returns than either venture capital or larger buyouts,” he added.

Aylwin also said banks were generally more willing to back lower-mid-market deals than larger buyouts.

The research showed secondary buyout volume had risen to 25, up from 10 in 2010. There were eight public-to-private transactions, four of which completed in the final quarter, Lyceum said.

From a sector perspective, technology, media and telecommunications proved to be the most popular for deals, with 26 transactions, ahead of business support services and industrial companies.

Just nine firms accounted for 45 percent of the overall deals, according to Lyceum. LDC, the captive buyout unit of UK lender Lloyds, led the way with 12 deals, ahead of ECI Partners with five, and Lyceum, HIG Capital and Better Capital with four each. Bowmark Capital, Electra Private Equity, Endless and Inflexion rounded out the list with three deals apiece.