Midlands private equity activity falls in 2023 amid challenging macroeconomic environment - report
Mid-market private equity investment activity in the Midlands declined in 2023, as challenging macroeconomic conditions presented few glimmers of hope for recovery, according to KPMG UK’s latest Mid-market Private Equity report.
The firm’s latest report, which tracks deal flow and market sentiment, revealed that 64 deals worth £5.1 billion were completed in the Midlands in 2023, representing a 20 per cent drop in volume, and a slight drop in total value by 4.5 per cent, when compared to the transactions completed in 2022.
The Midlands attracted over 9 per cent of all investment in 2023, making it the third most popular region for mid-market deals after London and the North East.
Nationally, the mid-market Private Equity report revealed that 675 deals worth £47.9 billion were completed during the year, representing a 10 per cent drop when compared to the 735 transactions completed in 2022.
Whilst across the board, deal volumes were down in 2023, Business Services remained the dominant sector for activity, followed by Tech, Media and Telco (TMT). Conversely, Financial Services was the only sector to buck the trend with an increase in investment activity.
Khush Purewal (pictured), head of deals at KPMG UK in the Midlands said: “As we entered 2023, there were high hopes of a return to stability. However, it soon became clear that 2023 was going to be a challenging year for dealmaking.
“Persistent macroeconomic instability meant that deal momentum in the Midlands was subdued, but we saw an uptick of 18 per cent in the total value of investment when compared to pre-covid figures – hinting at a stabilising market.
"M&A markets do not need ultra-low interest rates and a bull market to flourish, but they do need economic and political stability, and over the last 12 months, both have been in short supply.
“Whilst political uncertainty may well feature in 2024, we are optimistic that the Midlands will continue to be a haven for mid-market private equity investments in the UK.
“The fundamentals that underpin the private equity market are still very much in place. Capital is available, and the debt markets are still supportive - albeit with greater scrutiny and higher costs. This, together with the stability that bolsters the confidence of Boards, Investment Committees and Credit Committees, should pave the way for a more positive dealmaking environment in 2024”, concluded Purewal.
