Despite the disruption caused by the third Covid-19 lockdown at the start of the year, deal activity within the Yorkshire and Humber region made a promising start in the opening quarter – according to Experian’s Q1 2021 M&A Review – continuing from where it left off at the end of 2020.
Deal volumes were up 9% on a year on year basis, from 169 in Q1 2020 to 184 recorded in Q1 2021 – the highest first quarter figure over the last five years. The positivity in deal numbers was reflected in transaction values which rose to just over £1.4bn (up from
£761m in the corresponding period last year).
Yorkshire and Humber-based companies were involved in 11% of all UK deals in Q1 2021 and contributed 1.7% to their total value.
Acquisitions dominated the top deals for the region (the five biggest deals were all of this type), moving away from the fundraisings and rights issues which dominated most of 2020 because of the uncertainty caused by Covid-19 issues.
The largest of these transactions saw Drax Group, a Selby-based electrical power generation company, close a deal to acquire Pinnacle Renewable Energy, a Canadian producer and supplier of sustainable biomass, for £423m including debt.
This was some way ahead of the next most notable transaction which saw Doncaster-based Polypipe Group, one of Europe’s largest manufacturers of piping, underfloor heating and energy-efficient ventilation, agree the £210m all cash acquisition of London TopCo (trading
as ADEY), a Cheltenham-based provider of magnetic filters, chemicals and related products, from exiting investor LDC.
Manufacturing remains the most active sector in the Yorkshire and Humber region with 59 transactions so far in 2021, some way ahead of wholesale and retail (with 46) and professional services a close third on 44 transactions.
These sectors, along with financial services, infocomms, support services, transport, mining and quarrying and education all reported double-digit growth in deal numbers for Q1 2021 on a year on year basis.
In respect of transaction values, there were only seven of the 19 sectors which reported an increase; the most notable of these being in manufacturing (where deals worth £925m were recorded), wholesale and retail (£343m), support services (£195m) and infocomms
(£170m) reporting triple digit growth or more.
It is also important to mention the transaction which saw waste management company Biffa acquire Company Shop, a Barnsley-based redistributor of surplus food and household products, for just under £88m – this was a significant factor in driving up deal values in the waste management sector from just £3m in Q1 2020 to £104m in the corresponding period for this year.
Where detailed funding arrangements were disclosed, Experian recorded a total of 14 transactions that were funded at least in part via new bank debt; down from 27 over the
same period in 2020.
Caple, a European specialist in SME growth credit, has been the region’s most active lender so far providing funding for three transactions, rising above the more traditional lenders HSBC and Shawbrook Bank that provided funding for two deals.
Private equity has been a prominent source of funding in the region having been involved in funding 29 transactions so far this year, making it the second most common source of funding for new deals behind cash (67). Whilst the number of deals funded via private equity has increased moderately (from 21 last year), there has been a huge spike in the value of those deals from £15m to just under £83m.
BHP Corporate Finance has been the most active financial adviser so far in 2021 having advised on 11 transactions (up from 7th in the same rankings in 2020); just ahead of RSM and PwC on nine and seven deals, respectively.
RBC Capital Markets was the lead financial adviser by value by virtue of a single transaction – acting for Pinnacle Renewable Energy in its £423m acquisition by Drax mentioned previously.
Squire Patton Boggs are at the top of the legal value rankings, having provided advice on
10 deals for an aggregate consideration of £257m. The highest legal adviser by volume was Clarion Solicitors on 15 transactions, edging out Gateley (14) and Schofield Sweeney in third with 12 deals.