Prime targets for private equity

The report, which was commissioned by the British Private Equity and Venture Capital Association (BVCA), professional services firm Deloitte and NorthEdge Capital, examines the role private equity could play in helping to reduce the North-South economic divide.

The paper identifies the characteristics of a business that would make it suitable for private equity investment.

The report, which was written by Professor Nick Wilson from the Credit Management Research Centre and Professor Mike Wright from the Centre for Management Buyout Research, concluded that 1,187 firms based in the North would be ripe for private equity investment.

There are currently around 654 companies which already have private equity-backing in the North,

Richard Young, the director of the BVCA in Manchester, said: “This report provides the first rigorous analysis of private equity activity in the North and the pool of companies in which private equity firms like to invest.

“What it shows is not only that private equity is a driver of economic growth in productivity and jobs, but also that there is the potential for investment levels to increase significantly.”

Grant Berry, managing partner at NorthEdge Capital, said: “The size of the Northern lower mid-market should not be underestimated.

“It’s approximately two-thirds the size of France and Germany and twice the size of Spain. There’s also real entrepreneurial spirit in the regions as we have seen with our recent exits of game developer Sumo Digital and tissue paper manufacturer Accrol.

“These businesses have demonstrated an ability to scale up over a short period and have created a significant number of jobs across the north. It’s promising that there are so many businesses out there that are fit for private equity and we look forward to partnering with a number of those management teams over the next few years.”

Martin Jenkins, the Leeds-based practice senior partner at Deloitte for Yorkshire and the North East, said: “Private equity can play a significant role in enhancing the North’s productivity rating, scaling up operations in terms of revenue and employment. The backing of an investor has already been shown to yield strong results for management teams, offering both funding and expertise to sustain this growth.

“These results demonstrate some of the core values of the Northern Powerhouse, namely strength of leadership and entrepreneurial vision of region’s businesses. We’re confident that with ongoing support and guidance, we can continue to close the gap to London and the South East.”

The report found companies that receive private equity backing outperform benchmarks in productivity growth, when compared with non-private equity-backed companies, by as much as 9 per cent.

The report said: “This productivity outperformance is true across the whole of the UK but is strongest in the North. Productivity growth for these northern private equity-backed companies is accompanied by three-year compound annual growth rates of 5 per cent in sales, 9 per cent in exports and 3 per cent in employment.

The North is defined as the North East, North West, Yorkshire and the Humber and the East and West Midlands.