Private equity investment has fallen in Yorkshire as UK activity reaches lowest levels for five years, according to KPMG survey

The number of Yorkshire transactions fell by more than half (59%) in the first six months of 2019, with just 11 deals completing in comparison to 27 in H2 (the second half) of 2018. Despite the overall value of investment falling to £1.03 billion, down from £1.67 billion, the average deal value grew from £61 million to £93 million.

A KPMG spokesman said: “Year-on-year, the overall value of investment in Yorkshire businesses fell by almost half (43%) given £1.81 billion was invested across 28 deals in H1 last year. Again, by comparison, average deal values in H1 this year increased significantly year-on-year suggesting that, for the right opportunities, investors are still willing to deploy substantial funds.”

Christian Mayo, head of corporate finance at KPMG in Yorkshire, said: “For many, the slowdown in activity during the first half of the year will be viewed as investors pulling down the shutters while they wait for the current economic and geopolitical headwinds to blow over. However, what we are seeing is a reticence amongst vendors to bring assets to market.

“The truth is that private equity firms remain hungry to invest, as evidenced by the fact that average deal values remain strong and deal multiples are at record highs. However, investors are avoiding higher-risk transactions that they may have been willing to undertake a couple of years ago, when the market was more steady and they could price risk into both the deal and its structure. Instead, they are focusing on higher quality opportunities, considering them safer bets in the short term.”

Nationally, investment in the UK private equity market has fallen to its lowest level in more than five years.

KPMG’s study of UK transactions involving private equity investors over H1 2019 indicates that both deal volumes and value have fallen to below levels last seen in 2014, with 384 deals completing between January and June 2019 with a combined value of £28.5 billion. This compares to 483 deals totaling £31.5 billion which completed during the first half of 2014.

Mr Mayo concluded: “While a significant amount of pre-deal activity is expected to occur over the summer months, it is likely that most deal decisions – unless driven by other market factors – will be deferred until a Brexit outcome is known. However, once the Brexit conundrum is resolved, we may see a flurry of asset sales, investment activity and deal making as both sellers and buyers look to make up ground following this lengthy period of uncertainty. We are optimistic that this could lead to a bump-up in investment activity as we head into next year and our own practice, which has supported more than £0.5 billion-worth of transactions in recent weeks, is supportive of this.”

Recent PE deals on which KPMG’s Corporate Finance practice in Yorkshire advised include Maven’s sale of GEV to Bridges Ventures and Trelleborg’s acquisition of Signum Technology. The firm also advised on the £265 million recommended cash offer for Premier Technical Services Group plc from Macquarie.