Deals volume and value slump in North East

THE number and value of deals carried out in the region fell in number and also dramatically by value last year, according to figures out today.

THE number and value of deals carried out in the region fell in number and also dramatically by value last year, according to figures out today.

The mergers and acquisitions (M&S) report by data specialist Experian showed a total of 143 deals announced in the North East in 2012, compared to 155 in 2011. And value dipped from £7,966m in 2011 to £1,074m.

The figures contrast with neighbouring Scotland, where deal volumes rose to 401 from 363, with values increasing to £18,391m from £14,030m.

Paul Mankin, corporate finance partner in PwC’s Newcastle office, said: “It is comforting to see that the Experian data supports our own view that the North East deals market was relatively stable in line with most of the rest of the UK in terms of deal volumes last year. However we do not recognise the dramatic fall in North East deal values. In part, this is because the data on value is increased by the inclusion of the sale of Northumbria Water for £2.4 bn in 2011, but also the 2011 data seems to include a number of transactions that we do not believe ever completed and/or are in respect of companies that are not based in the North East.

“Although deal values in the North East were down in 2012, we do not believe that the underlying reduction is anything like as dramatic as this data suggests.”

Rod Wilkinson, head of corporate finance at KPMG in Newcastle, is confident the number of deals made in the North East will improve this year.

He said: “It’s inevitably going to remain a tough market in 2013. However, even without any dramatic step change in the market itself, there are sound reasons to expect a higher volume of transactions due to changing dynamics on buyers, increasing their appetite for deals.

“PE (private equity) houses will start to invest as their money starts to weigh heavily on them, and will also move on existing portfolio assets, generating their necessary churn.”

On a national basis, the number of deals was down by 3% but values were up, thanks to a 15% increase in the number of £1bn-plus transactions. They increased from 34 to 39, were worth a total of £128bn, and were mainly international deals. Overall, the total value of deals increased by 4.8% to £242bn.

Experian said the fall in volumes was mainly due to a slow down of deals in the final a quarter of the year, dipping by 11% compared to the last three months of 2011.

Food and beverage manufacturing was the most active sector for deals, followed by chemical manufacturing, and professional and business services.

The UK as a whole performed better than the rest of Europe, where deal numbers dropped by 10.2%, by 15.2% in the Asia Pacific area and by almost 5% in the US.

Experian business development manager, Wendy Driver, business development manager at Experian UK&I, said: “Despite the challenges faced by the eurozone crisis, the UK has proven to be one of the most attractive markets in what has been a subdued year for mergers and acquisitions globally.”


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