Private Equity In The Region

The recent Bloomberg report highlighted that there was a total of £750 billion of uninvested private equity worldwide, what is commonly known in the industry as "dry powder". That is up from around £150 billion in 2000 and represents an all time high of uninvested private equity.

It is perhaps not surprising then that North East private equity activity reached record levels in 2016 and shows no signs of slowing down in 2017. Market confidence continues to grow and overall deal flow has been supported by significant private equity investment providing momentum to the regional M&A market. Despite the uncertainties created by Brexit the M&A market has continued to be robust and private equity investors remain extremely active. The region is increasingly recognised by investors as a source of companies with great growth potential, and we have seen very strong interest for a number of North East companies advised by Cavu Corporate Finance over the last year or so, securing investment for companies across a range of sectors and sizes, including £80m revenue asset maintenance business Fastflow Group (investment from Elysian Capital), a £25m investment for financial advisory firm Fairstone Group (investment from Synova Capital), and a multi-million pound investment for consulting engineers Patrick Parsons (equity investment from LDC).

With an increasing amount of investment in the region, we have also seen a number of very strong private equity exits, generating excellent returns for investors, including the sale of Fine Industries to Lianhetech, Chemoxy to Novacap, and the £1.4bn acquisition of Parkdean Resorts by Canadian private equity house Onex. Despite any notions of pre-Brexit stutters in the M&A market, private equity funds remain very liquid and can provide solutions for companies looking to accelerate their growth or shareholders looking to de-risk their financial position by bringing in an equity partner. Generally recognised as providing returns in excess of the public markets, private equity funds are raising more money than ever, with an estimated $240bn raised so far this year across Europe and the USA. Combined with the existing dry powder in the markets this is creating a substantial surplus of cash in the market, with excellent deals to be had for companies looking to raise capital. Given these trends we expect private equity investment in 2017 and 2018 to remain at record levels.