UK Mid-market PE review 2022

After a record year in 2021, with 843 deals completed, KPMG’s latest study of UK transactions involving mid-market Private Equity investors showed a cooling in the deals market in 2022

Key Findings:

Over the course of the year 680 deals were completed, worth £46 billion, reflecting a year-on-year decrease of 19 per cent and 12 per cent. The picture for the overall UK Private Equity market was similar, with the total value of deals down 6 per cent from £180 billion in 2021 to £170 billion in 2022, and volumes down by 16.5% from 1,850 in 2021 to 1,544 in 2022.

However, despite ongoing economic and geopolitical uncertainty, UK mid-market Private Equity investment in 2022 grew by 13 per cent, at £46 billion, when compared against 2019 - the last ‘normal’ year - which saw £41 billion invested.

Resilient sectors prove to be safe bets for investors

From a sector perspective, Business Services and Technology, Media and Telecommunications (TMT) took the top spots for M&A activity as they have done consistently for the last few years. Together they accounted for almost two-thirds (63 percent) of all mid-market Private Equity deals in 2022, with Business Services accounting for 40% and TMT for 23 percent. Financial Services and Healthcare deals also held steady, accounting for 11 percent and just over 9 percent,

Mid-market PE exits continue to decline

Exit volumes fell by almost a quarter in 2022, when compared to 2021, with a total of 146 reported, while exit values saw an even more dramatic decline, with 2022’s aggregate value of £8.57 billion down 55.1 per cent on 2021. Trade acquirers accounted for over half of all exits with 79 deals, followed by secondary buy-outs with 61 deals. The ongoing volatility in capital markets meant that there were no IPO exits in 2022.

Despite market uncertainty, deal multiples rise

Despite market uncertainty, multiples in mid-market Private Equity deals increased in 2022 when compared to 2021, although they were still below pre-pandemic levels. The average multiple for mid-market Private Equity deals was 10.6x, up from 10.0x in 2021, but down from a high of 12.8x in 2019.