A positive upturn in deal making has been recorded for the Midlands in 2021, with an 18% increase in deal volume – from 859 in 2020 up to 1,013 last year – with the market appearing to have largely recovered from the impact of the global pandemic.
That’s according to Experian’s United Kingdom and Republic of Ireland M&A Review.
Value figures climbed to the highest they have been since 2012, with a total of £21.5bn. Small deals were up by 20% from 2020 to 150 announced for the year. The mid-market remained relatively static year on year, with 83 deals compared to 82 in 2020, but large and mega deals made an impressive return – large deals were up by 50% year on year and there were five deals with a consideration greater than £1bn in 2021, whereas no deals of this size were announced in 2020.
Acquisitions were again the most popular deal type in the Midlands, with a total of 707 transactions worth £7.2bn, a 28% and 75% increase in volume and value respectively. A relatively new deal trend in the region saw employee buy-out groups complete 12 acquisitions over the year for a total value of £31m – up from just three announced in 2020. The Midlands was the UK’s busiest region for deal making outside of London and the South East, with an involvement in 14.7% of all UK deals.
The final quarter of 2021 brought an additional two transactions to the top ten list. First, Triton’s £1.3bn buy-out of Burton on Trent-based pharmaceuticals group Clinigen – an improved offer after Triton’s original £1.2bn bid was sweetened to win the support of initially reticent shareholders. Then, European asset management group Aurelius completed the acquisition of Coventry firm McKesson UK from US healthcare company McKesson Corp, for an enterprise value of £477m – Aurelius’ biggest ever acquisition.
The largest transaction in the region by a long way remains US motion and control technologies business Parker Hannifin’s £6.3bn acquisition of Meggitt, the Midlands engineering firm that designs and manufactures systems and components for the aerospace, defence and electronics markets. The mega deal is due to complete sometime in Q3 2022.
Elsewhere, the region’s largest ever IPO was completed in January, when iconic boots brand Dr Martens commenced trading on the Main Market of the London Stock Exchange, raising £1.3bn for private equity owner Permira, which sold down part of its stake.
Deal volume was up year on year across the majority of sectors in the region. Manufacturing is traditionally the most active industry in the Midlands M&A market and remained at the top of the list in 2021 with a total of 302 transactions, up by 30% from the 231 announced in 2020.
Wholesale and retail was the region’s second most active industry with 245 deals, up 27% year on year. Elsewhere, despite being less active than the likes of manufacturing or wholesale, the real estate sector is usually quite prominent in the Midlands’ M&A market. However, only 40 qualifying transactions were recorded in 2021, down from 56 during 2020, perhaps suggesting that the rate of recovery in the real estate segment is lagging behind other sectors as many organisations look to embrace flexible working and alternatives to the traditional office environment.
There was a definite shift in the Midlands deal landscape in 2021, with a move away from the fundraisings that characterised 2020 back towards more acquisitive transactions. The number of early stage investments was down by over 26% on a year on year basis, but this was set against a 75% increase in outright investor buy-outs and an 11% rise in the number of management buy-outs.
The region’s most active capital provider was the Business Growth Fund (BGF), with 16 transactions in 2021 – up from 12 deals the previous year. Bank debt as a source of funds also saw an increase, up by 7% in volume; Maven Capital Partners was the most active source of acquisition finance in the region, with 14 deals, followed by high street bank HSBC, which supported a total of 11 transactions.
Grant Thornton was top of the Midlands financial advisers ranking with a total of 60 transactions, followed by K3 Capital with 55 and RSM assisting on 48 deals. The
value table was headed by Citigroup, with Rothschild second and Morgan Stanley third. The top-ranking legal advisor for the Midlands was Gateley with a total of 73 transactions, retaining the top spot they enjoyed in 2020. Second place also remained the same with Harrison Clark Rickerbys advising on 49 transactions in 2021, while Higgs was third with 45 assists. In terms of value, Freshfields Bruckhaus Deringer was the highest-ranking advisor with £7.7bn worth of transactions, followed by Slaughter and May and Weil Gotshal & Manges.
