Private Equity M&A Report 2021

Welcome to the 2021 edition of our annual review examining deal terms and trends in the M&A and private equity markets. For the third 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.

In our 2020 report we commented on the strong sellers’ market and whether this would continue given the darkening economic forecast at that time and increasingly uncertain business environment – little did we anticipate what an extraordinary year we would experience!

When the UK first entered lockdown in Spring 2020 we feared a sharp decline in deal activity and, while there was an undoubted pause as investors took stock, there was a relatively swift resumption of deal making in the second half of the year – albeit this activity was going ahead in completely new circumstances. During the year we worked on transactions which completed despite investors (or their advisers) being unable to physically meet with management teams and where deals were finalised over Zoom calls with family life often clearly evident in the background.

Simon Cope-Thompson, Managing Director and Head of Management Advisory at Arrowpoint Advisory commented: "The shift towards more deals being completed with trade buyers rather than PE investors was probably the most prominent trend in 2020, although many of these firms are backed by private equity.  This is likely to be reflective of the current volatile and risky market environment, with PE firms choosing to invest through proven teams, in sectors that have proved to be resilient to the Covid-19 crisis, as opposed to investing in new management teams.”

In several areas we saw a continuation of the trends in our 2020 survey and this is reflected in little change in many of the charts in this report. Changes we did note centre on an acceleration of deal activity in the latter half, partly at least driven by fears of an increase in capital gains tax rates.

We have also noticed a subtle hardening of buyers’ negotiating positions – with private equity investors being less generous with equity allocations to management teams. It is worth noting that from a seller’s perspective, where transactions have included an element of deferred consideration, management are being given longer to achieve targets in recognition that post lockdown trading may take a bit longer to recover.

As we reach the end of the first half of 2021 – we are seeing a continuation of last year's themes. With, what is hopefully an ease in lockdown restrictions and a return of more normal trading conditions, we are cautiously optimistic about prospects for the remainder of 2021.

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

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