Heart of the country

The West Midlands, in the heart of the UK, was home of the first industrial revolution and has maintained a longstanding reputation for manufacturing prowess ever since. It is now the UK’s largest regional economy outside London, offering a wealth of diverse new businesses that ranges from electric vehicles and alternative fuel technologies to health-tech solutions and business and professional services. 

The size of the economy and level of expertise translates into significant deal activity: in 2024 the Midlands recorded its highest number of deals for a decade, according to Experian Market IQ, with total deal value nearing £12.6bn. 

“The Midlands often gets overlooked in the national headlines, but the data tells a different story,” says Cavendish partner Darren Boocock, who joined the advisory firm in March this year, after 24 years at Deloitte in Birmingham, to head Cavendish’s newly opened office in the city – its second outside London, having opened a Manchester office last year. “Almost 17% of all deals were in the Midlands, which was the second highest amount outside London and the South East. It was pretty active, particularly for corporate deals – more than two-thirds of the total – as opposed to private equity deals.” 

The upbeat statistics seemingly run contrary to what has been a difficult period for the manufacturing sector. “The auto industry has been thumped hard over the past few years, with COVID, Brexit, supply chain and component availability issues, the government shifts on electrification of cars, rising labour costs and now tariffs. Yet still transactions are happening,” says Mathew Harvey, Birmingham-based corporate partner at law firm TLT. But there has been a level of diversification to offset risk, he says. “Ten years ago, many companies in the supply chain would have been heavily reliant on Jaguar Land Rover,” he explains. “However, a lot of those companies have now looked into moving away from that dependency.”

Precision Micro, a Fort Dunlop-based components manufacturer, is one example, says Chris Handy, partner and head of the West Midlands at LDC. “While the automotive sector remains important to the business, it has found new markets to grow into while its traditional markets are under pressure. The business has found an application for its product in next-generation energy production, in particular in hydrogen related applications.” 

Beyond global trade dynamics, more disruptive and strategic trends such as electrification, energy transition, sustainability, data analytics and automation are also driving M&A in advanced manufacturing, believes Richard Hopkins-Burton, a Birmingham-based industrials M&A partner at Deloitte. “These trends require new products and new technology,” he says, “and so are compelling companies to rethink their business models. Evaluating what their technology product and capability looks like today and how to fill any gaps in the portfolio is driving M&A. 

“A lot of the innovative technology that is attractive to investors comes out of Midlands-based SMEs,’” he continues. “I’ve worked on deals involving large UK corporates, overseas companies and PE companies looking at the next growth area in manufacturing, and picking up the technologies they need to exploit those areas.”

Service please

Outside manufacturing, one area seeing a lot of activity is professional services. Palatine’s backing of accountancy practice BK Plus, the acquisition of Haines Watts by Tenzing-backed Gravita, IK Partners’ acquisition of Dains, and Horizon’s creation of Adeptio law group, with FBC its first acquisition, all demonstrate the level of activity. “PE interest in buy and build is prevalent in professional services. We are seeing acquisitions that wouldn’t make sense in themselves but, when combined, add the weight and strength needed,” says Harvey.

Boocock agrees: “There is a view that consolidation and scale help, and also that legal and accountancy firms are a little behind in their adoption of technology. Alongside corporate and private equity buyers, Cavendish very recently acted as nominated adviser and sole broker on the AIM IPO of MHA – the UK’s 13th largest accountancy firm. It shows the breadth and level of activity in that market.”

Tech is another active sector – perhaps unsurprisingly, given that the Midlands is home to the UK’s largest technology hub outside London. 

“We are known for our manufacturing and engineering capabilities, but that in itself drives technology,” says Harvey. He points to a number of areas where like-minded people can come together, fostering innovation. These include Birmingham Science Park Aston, the Manufacturing Technology Centre and Silverstone Park. The innovative environment is underpinned by universities in the area including Warwick and Birmingham. “I see a number of innovative tech businesses emerging – for example, firms that build software for gaming have clustered around the Leamington area. At LDC two-thirds of our investments in the last two years have been in the tech sector, or in tech-related businesses,” says LDC’s Handy.

Mark Wilson, managing partner and founder of Birmingham-based Headpoint Advisors, agrees that the Midlands “punches above its weight in technology”, because of its manufacturing heritage. “It is still an end destination for inbound investment, whether from overseas or other regions in the UK. We recently completed a deal for Stickee Technology, a Solihull-based business which provides services to Apple, Google and PayPal. It was acquired by US business, Opensignal, backed by Berkshire Partners, a Boston-based PE firm.” 

While skills shortages remain an issue across the UK, Wilson points to a number of Midlands-based firms, such as JCB, that are helping by establishing academies offering apprenticeships. The Rigby Foundation (supported by Rigby Group) is also providing employment opportunities and recently announced that it is investing £600k to support 300 young people into tech careers in the West Midlands. 

Another sector of note, continues Wilson, is healthcare, where there has been an uplift in activity. “We advised Oxford Online Pharmacy, which has been growing very fast and was invested in by London-based Rockpool Investments. We are advising a number of firms within the Midlands that are working on digitising the NHS in different ways.”

Boocock points to regulation, compliance and testing as active areas for deals. “Private equity-backed Phenna has recently bought three businesses. Argus Fire was bought by Mitie and Siterwell acquired FireAngel Safety Technology. Due to the strong underlying fundamentals, private equity and corporates see that expanding in these areas is quite lucrative. Regulation is not something that is going to go away.”

Tight-knit network

An established network of investors, advisers and sources of funding supports deal activity in the region. Numerous investment firms include LDC, Palatine, NorthEdge, Beech Tree and BGF. A number of new funds have also been established, says Satvir Bungar MBE, Birmingham-based deal advisory managing director and head of business services at BDO: “Buyers continue to be attracted to businesses with strong long-term customer contracts and recurring revenue streams in place, which are therefore more likely to have predictable revenue and profit.”

A common theme underpinning this is the search for resilient value. “HGL Private Capital was launched by three former LDC leaders and will focus on equity investments of up to £10m. It’s set to be a major player based in the Midlands. NewHall Capital will focus on improving the supply of SME equity finance in the region. And the British Business Bank’s Midlands Engine Investment Fund II has marked its 100th deal, having driven more than £37m of investment into new and growing businesses across the region since launching last year.”

With regard to lending into M&A, there are a few high street lenders, of which HSBC is the most active, and increasingly credit funds, such as Shawbrook, Oak North and ThinCats. Legal and corporate finance advisers also have a strong presence in the region, meaning that, from an investor and corporate finance perspective, a well-established community has evolved. LDC has had a team in Birmingham since 1989. “There is a fully capable corporate finance industry located in the city. We know all of the players and a deal can be supported and completed without the need to go outside the region,” says Handy.

“The corporate finance community has transitioned over the past couple of years,” agrees Seb Saywood, partner at BGF, “with some of the longer-standing members having stepped away and new dynamic firms emerging. A couple of firms have moved out and created a void for other business to move into. Within that, there is still a desire for local businesses to work with local investors and advisers. It’s a very capable network that supports each other and wants the West Midlands community to thrive.” To add to that, Cavendish opened its office in Birmingham in March 2025.

Mixed messages

Going forward, the regional picture is not so clear. While 2024 proved to be a strong year for deal activity, the 2025 landscape is not easy to predict. “Government policy has had a dampening effect on activity levels,” says Wilson. “We hope the penny has dropped that they have been doing precisely the wrong things to stimulate growth and wealth creation. Last year was characterised by the double whammy of low growth and interest rate increases, which impacted those businesses with high working capital finance requirements. However, stability in 2025 is improving business confidence.”

But post-election and the budget, there is at least certainty in the market, says Saywood. “People like to know what the trading and political environment looks like. When there’s a degree of predictability and stability you can look at investments and assess ROI. It’s uncertainty that causes paralysis.” He believes opportunities will arise: “The same number of businesses exist. After a period of low activity, there will be a catch-up period.”

There are grounds for cautious optimism, believes Harvey. “There are still a number of challenges to be addressed, but with the backdrop of a difficult economic environment, there seems more activity than 12 months ago. Whatever the new norm is, we can deal with it. The problem is, the current economy and deal market are very fragile.” 

Hopkins-Burton sees that the disruptive trends the advanced manufacturing sector faces will continue, prompting further M&A activity. “The electrification transition has many years to go and is happening at different rates in different markets, meaning that M&A will continue. I can see a trend of nearshoring of supply chains and manufacturing, which will make more sense from an environmental, social and governance, trade and tariff perspective. That could be a new driver of growth.”

Bungar concludes on a positive note. “While the economic headwinds have created a difficult trading environment, the M&A environment looks positive. We have high-quality, resilient businesses, available financing, a need for new technology, and pressure on PE houses to show investment returns.”

Above all, he continues, “We’re home to some of the most exciting start-ups, cultural institutions, creative hubs and universities in the world. International investors see that and are not blinded by short-term crises. I’m confident Midlands-based businesses will continue to attract attention.”