Yorkshire M&A focus and outlook
With more than 500 Yorkshire companies changing hands last year, the regional market is currently in peak condition for buyer and seller alike.
Yorkshire’s broad range of deals highlights the options available to private shareholders, from small-scale merger to management buyout, and the occasional stock market flotation.
Significantly, Yorkshire dealmaking in 2016 showed a recovery to pre-recession levels, driven largely by activity in five key industries – food, healthcare, financial services, tourism and engineering.
Here, we explore the trends in these key markets, and what it means for buying and selling businesses in Yorkshire. Please read on to gain a fuller understanding of how active the local market is.
Yorkshire’s booming healthcare sector is centred on Leeds and York, and continues to attract strong interest from overseas acquirers and homegrown investors alike.
A broad range of Yorkshire healthcare SMEs have been bought and sold recently, from ongoing care home consolidation to cosmetic surgeries in York. European acquirers have been particularly prevalent in the region, with Swedish giant Indutrade snapping up Bradford hospital equipment manufacturer Sunflower Medical, and Leeds diagnostics firm Medisoft acquired by Heidelberg Engineering of Germany.
Elsewhere, York skincare group Integumen successfully floated a stake on AIM recently, demonstrating positive investor sentiment.
FOOD & DRINK
Yorkshire’s food and drink industry has long been a target for overseas acquirers, with famous examples including 1988’s sale of Rowntree’s to Nestle, Walmart’s 1999 acquisition of Asda, and the iconic Tetley Tea sold to India’s Tata Group in 2000.
Some of the more interesting food deals include the acquisition of Hull food manufacturer Chaucer Group by Japanese instant food specialist Nagatanien.
The combination of rising raw material costs, changing shopping habits, and emerging new category leaders are generating some intriguing tie-ups. For example, Northern Irish crisp-makerTayto Group – which owns Golden Wonder, Real Crisps and Mr Porky – recently acquired Leeds vending machine operator Freedom Refreshments, giving Tayto access to the UK vending machine market.
The presence of so many large food groups in the region also produces a steady stream of executives-turned-private investors, looking for SMEs to scale up, as seen with the sale of Doncaster’s Real Yorkshire Pudding Company.
Domestic tourism in the UK has been growing at 7% a year, and private equity investors in particular have been quick to spot the returns.
Local examples include Halifax-based golf holiday operator acquired by a private equity-backed firm, and the sale of an upmarket holiday park firm in York to Midlothian Capital Partners. Similarly, new leisure trends are also attracting growth capital investment, with this Castleford trampoline park operator securing £5m from Guinness Asset Management.
Yorkshire may be better known for its building societies, but it is the Leeds insurance cluster currently seeing the most corporate or investor activity.
Again, private equity has been leading the charge, with Leeds reinsurance specialist UK General Insurance snapped up by US investor JC Flowers, while Leeds broker Marshall Wooldridge was acquired by Penta Capital-backed Global Risk Partners.
Elsewhere, a York broker was sold to London firm PIB Insurance, after the buyer was recently backed by global investor Carlyle Group, while Fosun recently led a Chinese syndicate to invest £13m in Sheffield insurance analytics firm The Floow.
Yorkshire’s industrial heritage has remained largely concentrated in West and South Yorkshire, and continues to generate strong market interest.
Sheffield group Pressure Technologies acquired Hull-based precision engineer Martract for £4.3m as part of a move to reduce the acquirer’s lead times and offer new solutions to its oil and gas clients. Barnsley abrasives manufacturer Red Dog Linings was backed by Barclays to fund a large expansion programme.
Yorkshire’s engineering prowess continued to attract overseas acquirers, with Leeds jukebox-maker NSM Music sold to a US competitor, while Sheffield rail engineering firm Mechan was acquired by France’s CIM Group.
The £140bn Yorkshire and Humber economy has much to offer investors and acquirers. As the current healthy transaction levels demonstrate, private equity investors are scouring the area for SMEs to buy into.
European acquirers have continued to buy UK companies in large numbers since last June’s EU referendum, and are investing heavily in new plant, product development, and back office support.
With the US presidential election now decided, American corporations are returning to the M&A trail at an increasing rate, which would compensate for any subdued appetites as Brexit discussions muddy the waters.
Finally, we expect a continued increase in technology acquisitions by non-tech buyers, as the Internet-of-Things and big data start driving more corporate strategies – particularly in insurance, consumer electronics, and healthcare.