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South Westward Ho

The South West has a strong corporate finance community that has seen an uptick in deal volumes postrecession. And it has exceeded the rest of the UK, says Christian Annesley.

The South West – encompassing a five million-strong population from Gloucestershire to Cornwall and the Isles of Scilly – has always had strong associations with business, entrepreneurship and industry. In the first half of the 19th century Isambard Kingdom Brunel brought the industrial revolution to the region, and his civil engineering feats expanded the trade routes to the US. Another Bristol-based industrial pioneer, James Dyson, may have come a century later, but is still a commanding figure in his own right. Then there is Bristol’s four-time Oscar-winning Aardman Animations – the studio behind Wallace and Gromit.

How does this square with the realities on the ground for the corporate finance community, working on transactions and M&A? The number of deals getting done is a good place to start, and the recent picture is positive.

Bigger bounce

Since 2011, when deal volumes started to pick up again in the UK, after the transactions slump precipitated by the 2008/09 financial and economic crisis, the South West deals recovery has been strong. UK-wide deal volumes have been up every year by between 8% and 12% since 2011, but the South West has outperformed that: volumes have registered growth of between 10% and 15% per annum. This growth level means that in 2015 deal volumes for the region exceeded the previous record (530 in 2015 to 480 in 2008, according to Experian Corpfin). By comparison, deal volumes for the UK as a whole remain below the country’s previous deals peak, which was in 2007.

Of course, those headline figures are only one measure. What tells us a different story about the region, an area dominated by privately owned SMEs, is the relatively small size of the deals done. The megadeals to be seen in other parts of the UK are not to be seen in the region.

In addition, while a great many deal valuations have always gone unreported nationally, the tendency is perhaps even greater in the South West. In the UK, only half of private company deals have a value disclosed, and the figure falls to a third for companies in the South West. So, the calculating average deal values can be difficult.

With all of those caveats, Experian estimates the average deal value for the region in 2015 was £36m. That is a long way short of the average UK deal value for the same period – £138m.

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