Private Equity M&A Report 2020

Welcome to the 2020 edition of our annual review examining deal terms and trends in the M&A and private equity markets. For the second year running we are delighted to work alongside Pinsent Masons and Howden M&A to pool our deal data, which we believe provides the most comprehensive analysis of UK mid-market transactions available for review by buyers and sellers alike. We hope it proves a useful benchmarking tool for your transactions.

So what of this year’s findings? Clearly economic conditions in 2019 were testing and not helped by the ongoing political uncertainty of Brexit and President Trump’s ratcheting up of international trade tensions. While the UK election result in December 2019 appeared to have proffered some investor certainty going into 2020, the advent of the Covid-19 virus and what looks like a potentially difficult post-Brexit trade negotiation with the EU means buyers and sellers will continue to face significant uncertainty and deal volumes are likely to be suppressed.

We are at present in uncharted economic waters - since the outbreak of Covid-19 global financial markets have been extremely volatile and central banks and governments across the world have had to intervene to provide some liquidity and stability. At the same time reports suggest the global private equity industry started the year with dry powder of in excess of $1.5 trillion. In the short term, private equity funders will focus their attentions on managing their existing portfolio companies particularly as they navigate their way out of lockdown, but later this year we anticipate private equity will look to take advantage of pricing adjustments borne out of the current economic crisis by targeting both P2P transactions and private company acquisitions. Where activity is currently continuing, this is typically in what are perceived to be more robust/less impacted sectors such as IT and infrastructure where companies are more resilient to the impact of the Covid-19 crisis.

Despite the economic uncertainties presented by Brexit in 2019, there were strong levels of M&A activity, particularly by private equity houses or private equity backed companies. Primary buyouts in 2019 were at their highest level, as a proportion of deals surveyed, since we began our deal trends reporting five years ago. This is particularly refreshing as it demonstrates that deal origination activities remain strong and a growing range of businesses are getting access to private equity firepower and expertise.

The rise in use of W&I insurance continued in 2019 and featured in over half of all deals surveyed and in a staggering 93% of all new platform private equity deals covered by this report. Even where insurance has not been used, the fact that it is an available option has continued to drive incredibly seller friendly limitations on liability. As 2020 progresses it will be very interesting to see whether this insurance driven trend continues or whether there is something of a rebalancing prompted by a revised appetite for risk or indeed an adjustment to insurance coverage options after the insurance industry has absorbed the costs of the Covid-19 crisis.

Click here to download your full copy of our Private Equity M&A Report.

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