KPMG's latest mid-market private equity review shows that between January and June this year, 785 private equity deals were completed with a combined value of £73.7bn – an increase of 61% in volume and 48% in value compared to H1 2020. 

Across mid-market private equity dealmaking, the first six months of 2021 saw 377 deals at a combined value of £20.7bn. This represents the highest levels of activity since H1 2017 and marks a significant increase on the 260 deals at an overall value of £14.9bn recorded in H1 2020.

The rise in availability of private equity cash correlates with the bidding for UK firms, as private equity firms and overseas buyers propel bids for British businesses to their highest level since 2007.

The volume by combined value of takeover attempts involving UK targets has reached almost $217bn (£156bn) in 2021, the highest year-to-date total for 14 years and up from $58bn in the same period a year ago, according to Refinitiv, the financial information provider. 

Companies including property group St Modwen, respiratory drug developer Vectura and supermarket chain WM Morrison have attracted bids since the beginning of the year.

Foreign suitors and private equity groups have been encouraged by London Stock Market valuations, which trades at a relative discount to equity markets in Europe and the United States. While share indices in America, France and Germany have recovered from last year’s COVID-19-induced falls and are above their pre-pandemic levels, the FTSE 100 index of Britain’s biggest companies is yet to regain all its losses. This is partly due to investor concerns about the long-term impact of Brexit, which has daunted on UK equities since the vote to leave the EU back in 2016.

As a result, buyers, whose confidence has been maintained by the progress of the coronavirus vaccination rollout, have pounced on low-priced valuations. Low borrowing costs because of decreased interest rates also have facilitated the boom in takeovers.

The number of bids for UK companies is also at multi-year highs, according to Refinitiv, including takeovers of private companies and bids for British groups by UK firms. There have been 2,463 deals this year, the highest number since at least 1998, the data shows. They included 220 takeover proposals last month with a total value of about $35bn and 349 in June with a combined value of about $37bn.

Full report: KPMG’s UK mid-market PE review

More support on private equity

• Private equity - the Business Finance Guide
• Case study: Green Unit
• Case study: Naturelly