The European developed markets attract massive investment from Private Equity/VC buyers and the UK is one of the region’s most popular. Despite the ongoing impact of economic volatility, in H1 2022 the UK saw the highest deal volumes and deal values of all countries in the European developed market.

In the six months to June 2022 the UK saw 1,094 transactions involving Private Equity/Venture Capital – 26% of the total number of transactions involving companies based in the European developed market.

This is an increase of 3% over H1 2021 and saw the UK overtake Germany.

Deal values were strongest in the UK

Whilst 80% of deals were made by 6 countries, UK, France, Germany, Spain, Italy and Netherlands, deal values, where they were disclosed, were also strongest in the UK at £34 Bn. This included 36 mega deals, i.e. with values over £500m, involving European businesses, indicative of the underlying strength of Mergers and Acquisitions activity in the region.

Real Estate tops the leaderboard

In terms of sectors, as in H1 2021, the top 5 industries, in terms of deal volumes, accounted for more than 75% of all deals announced.

All the Top 5 saw an increase in Private Equity investment this year, confirming the growing appeal for this type of buyer in the European market.

Whilst the UK saw significantly increased Private Equity investment in all five sectors, the biggest increases were in the Information Technology and Health Care Sectors.

Is Private Equity the right partner to deliver your exit route?

Business owners are often unclear and/or unsure about whether a Private Equity firm is a type of buyer they would want to engage with as part of an exit strategy. In our experience their suitability depends very much on what the owner wants to achieve from an exit, and that can vary considerably.

The key point is to understand the way that Private Equity firms operate before deciding that this is the exit route to choose.

Private Equity firms invest in or acquire private businesses using funds raised from various sources including, for example, pension funds, institutional investors, family offices and wealthy individuals.

They aim to deliver much higher returns for their investors than they might get from investing in public companies.

As a quick summary :

·         Private equity firms back experienced management teams

·         They will usually take a seat on the board, contributing the skills that the acquired business needs to achieve its growth plan. This may include funding (and often finding) acquisitions

·         A PE buyer will tailor each transaction to meet the requirements of the exiting shareholders, whilst ensuring that the crucial management team is incentivised to deliver the growth plan

·         Full or partial shareholder exits can be accommodated

·         A PE buyer will typically, but not always, have an exit plan, usually within 3 to 5 years. In the intervening period, this type of buyer will support the management team, providing the necessary resources to deliver the growth plan

·         When the time comes to exit, a PE backed firm is usually well set up to attract a wide range of buyers, whether that be another PE firm or a trade buyer, and ready for its next phase of growth

Private Equity can be a good option for business owners that have created a business with an experienced, motivated management team, and a robust, achievable growth plan that they can deliver.

Over time we have found an increasingly high proportion of our clients favour this kind of option, remaining in the business for a period that suited them and benefitting financially from the growth that the business achieved.

If you would like to know more about the different exit options for your business, please register for our next free Masterclass (London, 12 October) or contact us via the online form or simply call us on 0118 959 8224.

DATA SOURCE:

Standard and Poor’s CapitalIQ database. Criteria used was 1 Jan 2022 to 30th June 2022. Primary feature: Merger and Acquisitions , acquisition of equity stake or Private Placement, Private Equity or PIPE or Growth Capital.