Wednesday, September 23, 2020

H1 deals fall short in Yorkshire and Humber

Yorkshire and Humber’s M&A activity was substantially different for deals recorded before and after the UK lockdown on 23 March, according to Experian’s H1 M&A review.

There were 220 transactions announced in the first six months of the year, with this being split into 141 before and 79 after.

These numbers were significantly down on the 344 deals recorded in 2019 for the same
stage, whilst also being the lowest recorded since the beginning of first half of 2014.

The value of the deals reached just over £1.5bn, well short of the £2.2bn figure for the previous year. Yorkshire and Humber-based companies were involved in 8.7% of all UK deals in 2020 and contributed 1.5% to their total value.

Rights issues dominated the top deals for the region within the first six months, with five of the seven largest deals falling into this category – significantly, with four of these coming post COVID-19 UK lockdown. The biggest of these saw Leeds-based Dart Group (owners of Jet2.com) announce a £172m placement in May – the proceeds of which will be used for working capital requirements and for general corporate purposes, with the airline industries being one of the worst sectors affected so far.

In the same month, the Polypipe Group of Doncaster also confirmed a placing to raise gross proceeds of £120m, which will be used to strengthen its balance sheet, reduce overall debt and lower leverage.

The largest buy-out deal by value saw Inflexion Private Equity acquire Rosemont Pharmaceuticals, a Leeds-based company which develops, manufactures and markets oral liquid medicines in the UK, from Irish parent Perrigo for £156m in cash.

Each of the top ten industries in Yorkshire and Humber have returned negative growth in terms of deal volumes year on year, with only the transport sector (nine deals) reaching the same number of deals for the same period in 2019.

There were only 64 manufacturing transactions announced (down from 107), whilst professional services (54) was the only other industry to break through the 50-deal barrier. The latter was the shining light in terms of deal values, recording transactions with a combined consideration of more than £500m – the only sector to do so and significantly higher than last year when deal values reached £217m.

The volume of reconstruction/refinancing transactions was again significant in context of the way the M&A landscape seems to have changed following the UK economy shut down – 16 deals of this type (18 in total for 2020) were confirmed, much higher than 2019 where
this region witnessed only four transactions throughout the whole year.

Where detailed funding arrangements were disclosed, Experian recorded 32 deals – approximately 14% of all acquisitive transactions recorded so far in 2020 – that were funded by bank debt. However, considering the additional reconstruction/refinancing
transactions (which aren’t usually recorded in these stats), this pushes the percentage figure above 21% as a proportion of all deals.

HSBC was the leading debt provider funding nine transactions (11 with the refinancing
deals). Private equity remained active (36 deals), funding 16% of all the region’s deals so far this year; this was just below last year’s percentage figure (15%).

KBS Corporate has been the most active financial adviser so far in 2020, having advised on eight transactions, just ahead of Mazars on seven deals. Cenkos Securities was the lead financial adviser by value advising on four transactions for a combined consideration of £275m. These included advising Dart Group in the deal mentioned previously and the same company in the sale of its Leeds-based subsidiary Fowler Welch to Culina Group for £98m (the fourth largest deal recorded in the region to date).

Addleshaw Goddard remained at the top of the legal value standings having provided advice on six deals for an aggregate consideration of £471m. The highest legal adviser by volume was Clarion Solicitors, which advised on 13 transactions, edging out Gateley in second place on ten deals.

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