SME deal volumes defy pre-Brexit uncertainty

Market uncertainty in the run up to the EU referendum has not damaged investor appetite for UK-based SMEs, according to a new report.

The Lyceum Capital and Cass Business School UK Growth Buyout Dashboard shows that the volumes and value of new investments in the first half of this year were consistent with the same period in 2015.

The first half of 2016 saw 40 transactions completed, worth an aggregate enterprise value of £1.63bn. Deal volume picked up in Q2 following a slow Q1, with 23 of the 40 deals completing in April or later. The study suggests that confidence for investment in UK lower mid-market companies is returning, with 10 deals already completed since June 23.

Andrew Aylwin, partner at Lyceum Capital, said: “During this period of uncertainty, I am most encouraged by the data and conclusions that our research has found. Volumes in H2 are likely to be lower than initially expected as investors assess targets’ prospects in this ‘New Normal’. However, the UK lower mid-market is set to shine again as a beacon of attractive investment opportunities, with the deepest pool of entrepreneurs and the strongest tech and digital economy hub in Europe.”

Scott Moeller, director of the M&A Research Centre at Cass Business School, added: “While it is still too early to predict the extent to which Brexit will affect the lower-mid market in the UK, we believe this portion of the industry is well placed to benefit from the new environment. Given the asset class’s strong performance and track record throughout the years, we believe that lower deal prices could also signal an increase in foreign investment, giving the industry even more scope and capability. UK private equity remains an attractive asset class that backs successful entrepreneurs who, like their investors, are resolute in the pursuit of their aims.”