UK mid-market: Going global

For many private equity professionals, 2009 was certainly a year to forget. Primary dealflow was scarce at best, as was available leverage, and the economic downturn brought woes upon existing portfolios. In light of this, most private equity houses directed their resources on nursing existing investments and trying hard to avoid defaults. Consequently, deal activity in the UK mid-market - here defined as enterprise valuations of less than £100m - almost halved in 2009, with unquote" recording a mere 69 transactions, down from 135 the previous year.

Many industry professionals therefore looked forward to 2010 as economic indicators were showing signs of improvement at the turn of the year and deal pipelines looked promising. Indeed, 2010 dealflow made a promising start, with volume and value figures for the first quarter topping those seen over the same period in 2009. That said, the real flurry of deals has not materialised. "There is quite a lot of competition for deals in the mid-market as there are not that many deal opportunities," notes Simon Lord of Altium Capital. The general consensus is that, so far, private equity houses have only brought their best assets to the market, while private owners are not flooding the market either. What is more, for private and family businesses it is not only a question of price when looking for a buyer as Lord emphasises: "For companies in general the question to any investor is what you can bring besides the colour of your money?"

Being able to differentiate oneself can therefore be a key factor to winning a deal and, especially when terms and price are very similar, bringing an international angle to the table can add value to the bid. After all, most companies have an international outlook today in order to generate shareholder value growth. That said, contrary to popular belief, the concept of internationalisation is not new as Sean Whelan of ECI Partners highlights: "Maybe there is a notion that UK mid-market activity is very UK centric, but this is certainly not the case as UK companies have always looked to expand overseas."

This is an extract from "UK mid-market goes global" feature to be published in the upcoming issue of Private Equity Europe.

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• Topics
• UK / Ireland
• Investments
• Mid-market buyout