UK transactions involving mid-market private equity investors in the North West of England dropped in 2023 amid challenging macroeconomic conditions, new analysis from KPMG UK has revealed.

The firm’s latest Mid-Market Private Equity study, which tracks deal flow and sentiment, shows that 69 deals worth £5.1bn were completed in the North West in 2023.

This reflected a drop in volume of almost 15 per cent, but also a slight uptick in total value by 9.2 per cent, when compared to 2022.

In terms of the proportion of deals completed in the region, the North West accounted for 10.2 per cent of all deals taking place in 2023, a slight reduction from 10.8 per cent in 2022.

Despite this the region still attracted the largest number of investments outside of the London region which accounted for 47 per cent of mid-market deals last year.

On a national level, mid-market private equity investment activity declined by 10 per cent in 2023.

675 mid-market transactions were completed during the year, representing a 10 per cent drop when compared to the 735 transactions completed in 2022.

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Meanwhile, the UK Private Equity market overall witnessed a more significant decline, with the total volume of deals down by 20 per cent from 1,802 in 2022 to 1,451 in 2023.

Whilst across the board, deal volumes were down in 2023, business services remained the dominant sector for activity accounting for 44 per cent of all deals, followed by tech, media and telco (TMT) which made up almost a fifth (18 per cent).

However, the volume of TMT deals declined by almost a quarter (24 per cent) year-on-year to the lowest level seen in five years.

Conversely, financial services was the only sector to buck the trend with an increase in investment activity, as 86 deals worth £9.5 billion were completed representing an increase of 13.6% in volume when compared to 2022.

The number of UK mid-market private equity-backed exits remained low, with the volume also down by 10%, from 202 deals in 2022 to 181 in 2023.

Rick Stark, head of private equity in the North for KPMG UK, said: “There’s no denying that 2023 was a challenging year for businesses and for deals, as inflation, high interest rates and geopolitical uncertainty featured throughout.

“Despite this instability which caused some prudence in the mid-market last year, it was promising to see that the North West remained the second most prolific region for mid-market private equity investments, only behind the London region.

“It’s great to see private equity drawn towards the North West, and we hope to see this strengthen in 2024 as we anticipate some confidence and stability returning to the market.”

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Christian Mayo, head of corporate finance in the North at KPMG UK added: “Prolonged uncertainty and challenging macroeconomic conditions stunted M&A deals last year, not just in the North West but across the country.

“However, whilst there may remain elements of uncertainty this year with elections approaching, dealmakers are hopeful for greater economic stability which should encourage more confidence across the market.

“We are already starting to see some of this confidence pull through, so we are hopeful for a more positive dealmaking environment in 2024.”