Spotlight on: UK and Ireland Q1 2021
Details of private equity (PE) investment across sectors which have performed strongly during the first quarter of 2021 is explored in the latest Clearwater International Multiples Heatmap.
99 deals were completed compared to 78 Q4 2020, which is the highest first quarter performance in the last seven years.
Clearwater International’s latest report on PE activity across the UK and Ireland shows that deal activity post-pandemic has shown the sharpest recovery of all European regions including highest quarter on quarter increases.
Deal multiples across the UK and Ireland saw four consecutive quarterly increases in the last 12 months to reach 12.9x with the majority of sectors witnessing increases in multiples.
In terms of volume, the data also showed a marked pick-up in PE activity in the first quarter of the year. In Q1 2021, there were 99 deals completed compared to 78 in the previous quarter, which is the highest first quarter performance in the last seven years. Although overall deal value fell slightly to £14m (€16.2m) from the previous quarter, it increased by 11% from £12.4m (€14.4m) in Q1 2020.
Sector strength
It is worth highlighting that the data has shown impressive deal volumes from the TMT and business services sectors, with more than a third of overall deal volume attributed to TMT. Business services came in at 22% and consumer transactions contributed to 14% of the overall figure.
The sought-after TMT sector has continued to generate high multiples which have steadily increased since last quarter, now nearing 14x. Deal volume within the TMT sector peaked to its highest levels since Clearwater International tracking began. There has been a noticeable increase in multiples across the business services sector which is also nearing 14x and deal volume which has seen quarter-on-quarter rises. Whilst the consumer and healthcare sectors have seen a jump in multiples, deal volume has remained relatively stable.
This sector strength is evident in Clearwater International’s portfolio of mandates and its healthy pipeline of expected completions. In Q1, TMT led a number of PE transactions including advising the shareholders of Hippo Digital on its minority investment from Growth Capital Partners, advising Bridges Fund Management on its investment in Matrix Telematics and advising Infinity Works on its sale to Accenture, marking an exit for investors Growth Capital Partners.
In consumer, Clearwater advised LeMieux on its investment from LDC and in business services the team advised Palatine on its acquisition of a significant minority shareholding in Anthesis Group.
the top end of the market saw some of the highest increases in multiples
Multiples
The LTM average quarterly multiple in Q1 was 12.9x across UK PE transactions, rising by 1.3x since the previous quarter and 2.1x from Q1 2020. In terms of deal size, the top end of the market saw some of the highest increases in multiples which has been impacted by a handful of mega deals. Deals valued between €50m-250m remained an active area of the market, although valuations have seen an overall decrease in multiples to sit more in line with pre-COVID valuations around 11 - 12x.
Trends
Marcus Archer, Managing Partner and UK Head of Private Equity at Clearwater International said: “It is clear by this quarter’s performance that the UK and Ireland are adjusting well to post-pandemic dealmaking, with increases in multiples and volume across a number of sectors. There has been a flight to quality for businesses in hot sectors such as technology, healthcare and business services, which is showcased by the continued increase in multiples, typically due to resilient business models and are trends Clearwater International is seeing in its own pipeline.”
“Resilient businesses have a renewed sense of confidence in the PE market, which should be supported by the UK posting the highest valuations across Europe, overtaking France and securing the largest number of deals which have increased by over a quarter (27%) compared to Q4 2020.“
“We expect the UK market to continue with this resilience as lockdown restrictions ease and businesses bounce back post-pandemic, particularly in sectors which have already performed well over the last 12 months.”
