Member Article

Deals revival backs up rising optimism

Martin Hulls, Partner and Head of Corporate at Ward Hadaway, takes a look at the North East’s deals market.

The North East’s deals market has seen a major upsurge during 2013 with signs of further activity to come in 2014.

We have seen a marked rise in transactions across the board during the past 12 months with little sign of deal levels falling off into the New Year.

The higher number of mergers, acquisitions, investments, fundings and sales during the year shows the regional economy returning to a healthier state, as well as funders returning to the acquisitions market.

There is no doubt from our perspective that 2013 has been the year that the North East deals market returned to something approaching normality. Since the financial crisis really hit in 2008, transactions have been fairly few and far between. However, during the past year there has been a marked upturn in deal numbers and in transactions of all types.

I think this is due to a combination of factors: investors with funds are looking for good investments; pent-up demand from people looking to sell their businesses; companies in a number of sectors are now doing pretty well since the recession and the general economic outlook has improved.

Trends in the North East deals market over the past year included the return of private equity firms to the region in greater numbers, backing businesses in a range of industries.

Ward Hadaway worked on one of the largest such deals in the North East, advising global specialist recruitment company Nigel Frank International on a £22m investment in the business by ISIS Equity Partners and HSBC Bank plc in July.

Ward Hadaway advised precision engineering company Express Engineering in October on an investment by private equity company LDC.

We worked on the other side of private equity deals during the year, advising investors including Total Capital Partners on its backing of the management buy-out of supply chain management company Meter Provida Ltd and Growth Capital Partners on the secondary buy-out of Fishawack. We also advised Santander and Barclays on funding for acquisitions.

As well as demonstrating increased appetite from private equity houses for investing in North East companies, the deals involving Nigel Frank International and Express Engineering typify another key characteristic of 2013 transactions; both are substantial companies operating in niche growing sectors. Well-run, well-managed niche businesses, particularly those in growth industries, are very attractive to external investors and banks and the North East does very well in this regard.

Another niche business to feature during 2013 was specialist online learning company Creating Careers. The Newcastle-based company was advised by Ward Hadaway on its sale to outsourcing giant Capita plc.

Overseas buyers were involved in a number of transactions during the course of the year, including the sale of Northumberland fishing tackle manufacturer Hardy & Greys to US group Pure Fishing, Inc. and the sale of Monitor Coatings to German multi-national Messer Cutting Systems, both deals where Ward Hadaway advised the North East sellers. Such well established businesses in specialist fields are attractive to overseas buyers.

Companies from the US have featured quite strongly recently – their economy picked up earlier than ours and there are a lot of energy-orientated companies based in the US for whom the North East’s thriving oil, gas and energy sector is particularly attractive.“

Flotations returned to the North East deals scene in 2013, Ward Hadaway advising Applied Graphene Materials plc on its Alternative Investment Market flotation in November. There does seem to be a greater appetite for stock market floats so it is a possibility we may see more in 2014.

Wider prospects for 2014 appear to be promising with reports pointing to increased investment and rising levels of confidence.

At Ward Hadaway, we already have quite a pipeline of work going into 2014 and the general feeling around the region is more positive than it has been for some time. We remain vigilant, but are cautiously optimistic that the New Year will continue the recovery we are starting to see.

This was posted in Bdaily's Members' News section by Ward Hadaway Law Firm .