By Charlie Carroll
Were evidence needed that the North of England is a corporate finance powerhouse, consider that the region is currently nurturing a buyout economy larger than those of the whole of both Spain and Italy. The total annual transaction value in the £10 million to £100 million range in the region has averaged about £4.5 billion over the last decade – a case of consistency writ large.
For corporate finance expert Kieran Toal, a partner in the Manchester office of national law firm Shoosmiths, this is not just a sign of health but also a sign of the entrepreneurial character of the region’s business community. “Here in Manchester we’re blessed with an entrepreneurial culture and with businesses being driven forward by entrepreneurs young and old,” he says, “and by ambitious management teams with a keen eye on enterprise and growth opportunities.
“When you combine that with probably the most expert and most competitive corporate finance community outside of London, it’s a compelling mix which does a huge amount for the UK’s Northern powerhouse ambitions.”
Mr Toal and his colleagues in the corporate finance team at the Manchester office of Shoosmiths advised on almost £900m of transactions in 2015 alone, many involving what could described as “Manchester born and bred” private equity houses.
It is these houses, Kieran Toal believes, which are critical to the continued health of the regional economy, funding the growth ambitions of businesses from all sectors and creating jobs and wealth. “We’re enjoying real success in corporate finance as a city,” he says, “but accounting for that is a bit chicken-and-egg.
“Is Manchester so blessed with talented private equity and corporate finance people because of the nature of the opportunity here – or do those professionals and investors help to create that fertile environment? To be honest, it’s probably a bit of both.
“What is clear, however, is that the native Manchester private equity houses enjoy some distinctive advantages over their London competitors. Local decision-making is faster and often more effective, and local networks and insight can bring the kind of value to a deal which isn’t simply financial.”
Mr Toal, who was recently singled out as one of the UK’s “up-and-coming mergers and acquisitions [M&A] stars” by trade publication Legal Week, led a number of notable transactions in 2015, including acting for Truworths International Limited on the £256m acquisition of 89 per cent of Office Retail Group.
Nationally, Shoosmiths was ranked joint-first in the Experian Deal Review and League Tables 2015 for volume of UK deals completed – and fifth in Europe. The team was also recognised for its mergers and acquisitions expertise at the 2015 M&A Awards, winning the Law Firm of the Year category.
Grant Berry, managing partner of Manchester-based private equity firm NorthEdge – which also has an office in Leeds – says proximity is critical for an investment model which sees weekly, rather than monthly, interaction with investee companies. “We’re hands-on in the best kind of way,” he says, “guiding management teams and bringing our extensive in-house experience to bear on the challenges and opportunities which come with growth.”
NorthEdge’s first fund closed at £225m in March 2013 and Mr Berry estimates that about two-thirds of their investments since then have been in North West businesses. “Various cities like to regard themselves as number two after London when it comes to private equity,” he says, “but most would accept that Manchester holds that title.
“The truth is that when it comes to deals at £150m and under, there’s nothing that an independent Manchester private equity house can’t deliver. It also absolutely remains the case that being in the same geographic region as an investee company significantly increases the chances of successful business performance post-deal.”
Grant Berry remains confident, too, about the future of the market despite macroeconomic wobbles emanating from China and elsewhere. “Global or European economic challenges might impact on levels of gearing and pricing,” he says, “but we’re optimistic that the deals market will continue to be active through the economic cycle.
“Regardless of the macro conditions, there will always be businesses with high-quality management teams and a compelling growth narrative that will be attractive propositions.”
Gary Tipper, managing partner of Manchester private equity firm Palatine, says one of the key differences between indigenous private equity firms and London firms which happen to have a Manchester presence is the seniority of the investment team with which a business will end up working.
“The tendency is for the London firms to have more junior teams in place in their regional outposts, with the real decision-making taking place in London,” Mr Tipper says. “It’s critical, in my view, that management teams in investee companies have access to the most experienced investment managers.
“I have been on 50 to 60 boards over the last decade and know that we, as a team, have the right blend of experience, from all kinds of sectors, to help companies achieve their ambitions.”
Founded in 2005, Palatine raised its maiden £100m fund in 2007. Its second fund closed at £150m in 2013. Both are now fully invested and the business is currently investing from its third fund which closed in 2015 at £220m.
Gary Tipper sees future opportunities across all sectors, but believes that financial services along with information technology (IT) and telecoms could be areas of growth. “Increased regulation is causing the kind of disruption which creates opportunities,” he says, “while the demand for data services will fuel growth in that area.”