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Private equity lower middle market buyouts challenge previous forecasts

  • UK Lower Middle Market beats the gloom to complete 42 new control investments in H1
  • 50% of deals came from Business Support Services

Investor appetite for UK-based SMEs remained buoyant in the first half of 2017, underlying the resilience of the lower mid-market (LMM). The findings come from newly released data on H1 2017 deal flow from the Lyceum Capital and Cass Business School UK Growth Buyout Dashboard – the half-yearly trend analysis of private equity investment, pricing, fundraising and performance in the LMM.

The first half of the year saw 42 control transactions complete worth an aggregate enterprise value of £1.69bn, on par with historical industry averages. Half of the deals came from Business Support Services, highlighting the sector’s continued importance to the UK economy and global leadership position. The number of TMT deals in H1 2017 accounted for 17% of the total completed, including Lyceum Capital’s acquisition of Newark-based managed cloud service provider, Timico.

Deal volumes were well spread across the country, evidencing just how diverse entrepreneurial talent is across the UK – with eight deals completed in each of the North West, Midlands and London; and seven in the South East.

Commenting on the findings, Andrew Aylwin, Partner at Lyceum Capital said: “The 2017 H1 results are a further testament to the deep pool of entrepreneurial talent we have in the UK. The determination and vision of the business leaders who provide outstanding products and services continue to be the driving force of the UK economy. Their sustained investment appetite and support means we are once again on track to see more than 80 deals completing by year end. Amidst all of the domestic and international uncertainty these figures demonstrate the enduring resilience and commitment of UK SME entrepreneurs and investors.”

Scott Moeller, director of the M&A Research Centre at Cass Business School, added: “The statistics demonstrate that the UK lower-mid market continues to defy the pessimistic forecasts. Perhaps the most interesting pattern to emerge from the data is the increasing number of investment hubs we are seeing throughout the UK – across the capital, North West, South East and the Midlands. Fundamentally, the figures underscore the fact that the LMM remains a key focus of growth in the UK private equity ecosystem.”