One In Five Deals Were Venture Capital Backed According To Latest Analysis

Mergers and acquisitions (M&A) activity in 2022 involving UK based manufacturers was at its highest level since 2016, according to law firm Irwin Mitchell.

Irwin Mitchell has analysed Experian’s Market IQ database and revealed that 1,344 UK manufacturing businesses were the target of M&A activity in 2022. This compares to 1,285 in 2021 and 1,231 in 2020.

According to Irwin Mitchell, deal volumes in the sector in 2022 were at the second highest level in the last 10 years with activity levels last year beaten only by 2016 when 1,537 deals were completed. 

In 2022, most transactions (57%) were acquisitions whilst management buyouts (MBOs) accounting for 4% of deals. Only 1% of deals were restructuring transactions compared to 9% in the previous year.

According to Irwin Mitchell, overseas bidders continue to have a big impact on UK M&A in the manufacturing sector. Last year 30% of deals with a UK-based target business involved an overseas bidder. Eight percent of these bidders were based in the US with Sweden accounting for 3.5% of deals. Germany and France both accounted for 2.3% of activity.

In 2021 overseas bidders accounted for 31% of deals with the US again being the most active. In 2020 the figure was 27%.

Venture capital also played a big part in manufacturing related deals in 2022 with 303 (22.6%) of transactions being backed in this way. This compares to 295 deals in 2021.

London and south-east based manufacturing businesses generated 316 transactions in total and this was the busiest area in the UK for deals in the sector. Over a third of deals (36%) in the capital where VC backed compared to the national figure of 22%. In the north-west, just 12% of manufacturing deals were backed by venture capital, while in Yorkshire the figure was much higher at 27%.

Expert Opinion

“This latest analysis may look surprising bearing in mind the challenges faced by economy last year and although activity dipped in the last quarter of 2022, these figures certainly reflect how resilient the manufacturing sector is.

“It’s clear that UK manufacturers are highly attractive to overseas buyers and also venture capital. At Irwin Mitchell we have recently advised a US PE client in the sector on an acquisition in the UK as well a South African listed company on a substantial UK acquisition, so the statistics are borne out by what we are seeing in practice.

“We have seen deal flow in the sector continue to be strong and early signs show that activity in 2023 may be even stronger than 2022.”
Emma Callow, corporate partner at Irwin Mitchell and manufacturing sector expert.

Irwin Mitchell’s corporate team has strong credentials in the manufacturing sector. Last year it advised Motus Holdings (UK) Limited on its £182m acquisition of UK-based automotive components supplier, Motor Parts Direct (Holdings) Limited. It also helped waste management group Reconomy complete its acquisition of leading recycling firm Casepak and sister company, Oceala. The team has also advised private equity firm Acorn Growth Companies on its investment in full-service aftermarket supplier of rotable parts for commercial aircraft, Aerospares 2000.