Over 1,000 Northern companies ripe for private equity investment

Snapshot
- New report finds over 1,000 companies in the North of England that fit the profile for private equity investment.
- PE-backed companies outperform non-PE-backed companies by 9%
- Outperformance strongest in the North
A new study has identified 1,187 companies in the North of England as potential targets for private equity investment, as politicians continue to debate how to drive growth and productivity in the northern regions.
Commissioned by the BVCA, Deloitte and NorthEdge Capital, the study examines the role private equity can play in unlocking the potential of the North, which continues to lag behind London and the South East in economic growth and productivity.
Authored by Professor Nick Wilson from the Credit Management Research Centre (CMRC) and Professor Mike Wright from the Centre for Management Buyout Research (CMBOR), the paper identifies the key characteristics of a business that would make it suitable for private equity investment and finds that the North is home to over a 1,000, in addition to the 654 companies which already have PE-backing.
Richard Young, Director, BVCA Manchester, said: “This report provides the first rigorous analysis of private equity activity in the North and the pool of companies in which private equity firms like to invest. What it shows is not only that private equity is a driver of economic growth in productivity and jobs, but also that there is the potential for investment levels to increase significantly.”
Grant Berry, managing partner at NorthEdge Capital, said: "The size of the Northern lower mid-market should not be underestimated. It's approximately two-thirds the size of France and Germany and twice the size of Spain. There's also real entrepreneurial spirit in the regions as we have seen with our recent exits of game developer Sumo Digital and tissue paper manufacturer Accrol. These businesses have demonstrated an ability to scale up over a short period and have created a significant number of jobs across the north. It's promising that there are so many businesses out there that are fit for private equity and we look forward to partnering with a number of those management teams over the next few years.”
Martin Jenkins, practice senior partner at Deloitte for Yorkshire and the North East, said: “Private equity can play a significant role in enhancing the North’s productivity rating, scaling up operations in terms of revenue and employment. The backing of an investor has already been shown to yield strong results for management teams, offering both funding and expertise to sustain this growth. These results demonstrate some of the core values of the Northern Powerhouse, namely the strength of leadership and entrepreneurial vision of the region’s businesses. We’re confident that with ongoing support and guidance, we can continue to close the gap to London and the South East.”
A summary of the report – Engines of growth: private equity and productivity potential in the North – can be found here. Highlights include:
- Companies that receive private equity backing outperform benchmarks in productivity growth against non-private equity-backed companies by as much as 9%.
- This productivity outperformance is true across the whole of the UK but is strongest in the North.
- Productivity growth for these northern private equity-backed companies is accompanied by three year compound annual growth rates of 5% in sales, 9% in exports and 3% in employment.
- Out of a total of approximately 3,300 companies identified in the UK with a strong statistical match to the ‘profile’ of being potentially suitable for private equity investment, there were 1,187 companies identified in the northern regions. This compares with a population of 654 existing private equity-backed companies and suggests that there is huge potential for further investment.
Notes to editor
- The full report - Private Equity Targets and Post Investment Performance: A Study of the Corporate Sector in the Northern Regions, Nick Wilson and Mike Wright, Working paper series, November 2016 - can be found here. A summary can be found here.
- For the purposes of this report, the North is defined as comprising the North East, North West, Yorkshire and Humberside, East and West Midlands government standard regions in the UK.
- The British Private Equity & Venture Capital Association (BVCA) is the industry body for the UK private equity and venture capital industry. The BVCA has over 600 member firms, representing the vast majority of UK-based private equity and venture capital firms and their advisers.