The most recent Dashboard analyses control investments with an enterprise value between £10m and £100m. It suggests that overall the volume of transactions for the first half of 2015 was almost identical to the previous six-month period (down from 36 to 35).
But across the same period the smaller deals, with a value less than £50m, increased by 16% from 24 to 27 – accounting for 70% of the total recorded in the research.
The total value of transactions with a value between £10m and £50m reached £825m during the first half of the year, the highest level in two years, despite depressed deal values in the overall lower mid-market. An increased appetite among SMEs for IPOs was also a feature of the figures. Three exits were recorded in 2015 H1.
Lyceum Capital partner Andrew Aylwin commented that British SMEs “have always been a strong feature of private equity-led M&A activity”.
“These figures show this trend is accelerating, most notably at the smaller end of the market where private equity often has a greater opportunity to drive transformational growth, value creation and investor returns,” he continued.
“Our own experience has also shown that companies at this scale are more insulated from macroeconomics and more able to change course if market conditions do become more challenging.”
Scott Moeller, professor in the practice of finance at Cass Business School, predicted that by the end of 2015 a pattern of continual growth would be apparent.
“Driven by consistent back-to-back activity for both realised investments and exits in 2013 and 2014, we expect 2015 to be the third year in a cycle of strong private equity activity,” he said.
“Indeed, lower mid-market activity has been remarkably consistent in the past two years, with less volatility than other equity and financial markets.
“Despite the recent macroeconomic shocks around the world, the UK’s lower mid-market is providing an ample supply of quality companies with strong management teams that make use of private equity investment to drive organic growth and buy-and-build strategies.”