- Private Equity News Wales -

Recent Private Equity News Wales: Key Deals and Trends in the Welsh Market

Recent private equity news in Wales has been dominated by a surge in investment activity in the region.

This has been driven by a combination of factors, including a growing appetite for risk among investors, a favourable economic climate, and a strong track record of successful investments in the region.

As a result, private equity firms are increasingly looking to Wales as a key destination for investment.

Cardiff in particular has emerged as a hub for private equity activity in Wales.

The city's central location, excellent transport links, and highly skilled workforce have all contributed to its growing reputation as a prime location for investment. In addition, Cardiff is home to a number of leading private equity firms, which are actively seeking out new investment opportunities in the region.

Despite the impact of the pandemic on the wider economy, private equity investment in Wales has remained strong.

This is due in part to the resilience of the region's key sectors, such as technology, life sciences, and manufacturing, which have continued to attract significant investment. In addition, private equity firms have been quick to adapt to the changing economic landscape, and have focused on identifying new opportunities for growth and expansion.

Key Takeaways

• Private equity investment activity in Wales is on the rise, driven by a favourable economic climate and a growing appetite for risk among investors.

• Cardiff has emerged as a hub for private equity activity in Wales, thanks to its central location, excellent transport links, and highly skilled workforce.

• Despite the impact of the pandemic, private equity investment in Wales has remained strong, with a focus on key sectors such as technology, life sciences, and manufacturing.

Recent Private Equity Developments in Wales

Private equity has been playing an increasingly important role in Wales' business landscape in recent years. According to a report by Experian Market IQ, the number of private equity-funded transactions increased in Wales during 2020, with 63 deals funded at least in part by private equity. Here are some of the recent private equity developments in Wales:

LDC's focus on Wales and the South West

Mid-market private equity firm Lloyds Development Capital (LDC) has been looking to ramp up its deal flow in Wales and the South West of England. In 2021, LDC completed transactions with a combined value of more than £280m in these regions. The firm has a portfolio of more than 90 businesses across the UK and has been investing in Welsh businesses for more than 20 years.

Schroders' £500m private equity mandate from WPP

Schroders Capital, the specialist private assets division of the Schroders Group, has been awarded a £500 million private equity mandate by the Wales Pension Partnership (WPP). The WPP is a collaboration of the eight local government pension scheme funds in Wales and one of eight national local government pension pools. The mandate will focus on investments in private equity funds that align with the WPP's responsible investment strategy.

British Business Bank's new Investment Fund for Wales

The British Business Bank has launched a new Investment Fund for Wales, which will consist of three elements aimed at supporting the growth plans of Welsh SMEs. Fund managers are being invited to bid to run the debt and equity elements of the £130m fund. According to the bank's latest annual Small Business Equity Tracker, the value of announced equity deals in Wales rose by 44% in 2021 on 2020 to £83m, despite the volume of deals falling by 22% on the previous year.

Potential for more private equity investment in Cardiff-based businesses

Cardiff has been identified as a potential target for private equity investment, with a number of businesses in the city seen as attractive prospects for investors. The city's thriving tech scene, in particular, has been attracting attention from private equity firms looking to invest in innovative start-ups.

Overall, the private equity landscape in Wales is showing signs of growth and investment, with a number of firms and funds targeting the region. As the Welsh economy continues to develop, it is likely that we will see more private equity investment in the coming years.

Cardiff's Role in Private Equity Investments

Cardiff, the capital of Wales, has been playing a significant role in the private equity investments scene in recent years. With the establishment of a £50m equity fund to back the scale-up of firms in the Cardiff Capital Region, the city has witnessed a surge in private equity investments.

One of the notable Cardiff-based companies that have received private equity investments is CatSci Ltd, a Contract Research Organisation (CRO) that supports leading global pharmaceutical companies to deliver life-changing therapeutics to patients around the world. Keensight Capital, a leading private equity manager dedicated to pan-European growth buyout investments, has invested in CatSci Ltd, demonstrating the city's potential as a hub for the healthcare industry.

Another Cardiff-based tech firm that has received private equity investments is Amplyfi, a generative artificial intelligence business. The company received the first investment from the £50m equity fund established to back the scale-up of firms in the Cardiff Capital Region. This demonstrates the city's potential as a hub for technology and innovation.

Private equity investments in Cardiff-based companies have not only helped these firms to grow and expand their operations but also created new job opportunities in the city. The establishment of the £50m equity fund has also helped to attract more private equity investments to the city, boosting its reputation as a hub for private equity investments.

In conclusion, Cardiff has emerged as a significant player in the private equity investments scene, particularly in the healthcare and technology sectors. With the establishment of a £50m equity fund, the city has witnessed a surge in private equity investments, creating new job opportunities and boosting its reputation as a hub for private equity investments.

Impact of Pandemic on Welsh Private Equity

The pandemic has had a significant impact on Welsh private equity. According to Economic Intelligence Wales, since March 2020, 66% of Welsh SMEs reported a decrease in turnover, with one in four reporting a contraction of greater than 50%. Around 21% of Welsh SMEs had temporarily closed or paused trading, with most of these in leisure, hospitality, wholesale, and construction. This has led to a slowdown in investments in Welsh mid-market private equity.

However, the pandemic has also led to a recalibration of sectoral focus to ensure portfolio resilience and renewed investor confidence. Private equity firms have been navigating numerous macroeconomic and geopolitical challenges, including inflation, interest rates, and supply chain disruptions. This has led to a more cautious approach to investments, with a focus on sectors that have been less impacted by the pandemic, such as healthcare, technology, and e-commerce.

Experian Market IQ data shows that Welsh private equity investments in the first half of 2021 were dominated by the healthcare sector, which accounted for 46% of all deals. This was followed by technology and e-commerce, which accounted for 23% and 15% of deals, respectively. The data also shows that the average deal size in Wales increased from £6.5 million in 2020 to £9.6 million in the first half of 2021, indicating a renewed confidence in the market.

Despite the challenges posed by the pandemic, Welsh private equity firms have continued to invest in the mid-market. According to a report by Skadden, Welsh private equity activity slowed abruptly at the pandemic's onset, then rebounded sharply during the second half of 2020. Today, this recovery shows little sign of slowing, indicating a resilient market that is adapting to the challenges posed by the pandemic.

In conclusion, the pandemic has had a significant impact on Welsh private equity, but it has also led to a recalibration of sectoral focus and renewed investor confidence. Private equity firms have been navigating numerous macroeconomic and geopolitical challenges, leading to a more cautious approach to investments. Despite the challenges, Welsh private equity firms have continued to invest in the mid-market, indicating a resilient market that is adapting to the challenges posed by the pandemic.

Notable Private Equity Investments

Private equity investments have been on the rise in Wales, with several notable companies receiving funding over the past year. Here are some of the most significant private equity investments in Wales:

Admiral Group

Admiral Group, a car insurance company based in Cardiff, received a £200 million investment from HSBC in 2022. This investment will allow Admiral Group to expand its operations and increase its market share in the UK.

Zip World

Zip World, an adventure tourism company based in North Wales, received a £45 million investment from private equity firm LDC in 2023. This investment will enable Zip World to develop new attractions and expand its operations.

Hybrid

Hybrid, a Cardiff-based marketing agency, received a £10 million investment from private equity firm LDC in 2022. This investment will enable Hybrid to expand its services and increase its market share in the UK.

Sohonet

Sohonet, a media services company based in Cardiff, received a £10 million investment from private equity firm Connection Capital in 2022. This investment will enable Sohonet to expand its services and increase its market share in the UK.

Shares

Shares, a financial services company based in Cardiff, received a £5 million investment from private equity firm Connection Capital in 2023. This investment will enable Shares to expand its services and increase its market share in the UK.

These private equity investments demonstrate the growing interest in Welsh companies among investors. With more funding available, these companies will be able to expand their operations and increase their market share in the UK and beyond.

Role of Management Teams in Private Equity

Private equity firms often invest in companies with the aim of improving their performance and profitability. One key factor in achieving these goals is the role of the management team. In many cases, private equity firms will work closely with the existing management team to develop and implement new strategies for growth and expansion.

Management teams play a crucial role in private equity transactions, particularly in acquisitions. In management buy-outs, the existing management team will often be the ones leading the transaction and taking over ownership of the company. This can be beneficial for both the management team and the private equity firm, as it allows for continuity and stability in the company's leadership.

Private equity firms may also bring in new management teams to help turn around struggling businesses or to drive growth in new areas. In these cases, the private equity firm will work closely with the new management team to develop and implement a new strategy for the company.

British business has seen a significant amount of private equity investment in recent years, with many firms targeting companies in a range of industries. Management teams have been a key focus for many of these transactions, with private equity firms looking for strong leadership and a clear vision for the future of the company.

In summary, management teams play a critical role in private equity transactions, particularly in acquisitions and management buy-outs. Private equity firms will often work closely with the existing management team or bring in new management teams to help drive growth and improve performance. A strong and capable management team is essential for the success of any private equity investment.

Involvement of Development Bank of Wales

The Development Bank of Wales has been actively involved in private equity investments in Wales. In the year 2022/23, the bank made 516 individual equity and debt investments totaling £124.2m, which leveraged £114.5m of private sector co-investment. The average deal size grew by 14% to £240,748.

The bank's equity investments have been instrumental in boosting the growth of early-stage tech firms in Wales. The bank invested £10.9 million in 31 different technology ventures, which helped attract additional private-sector investment of nearly £38m. The bank's investments into 220 firms between April and September also attracted additional private-sector investment of nearly £38m, around two-thirds of which was leveraged from its equity investments made into early-stage tech firms.

The Development Bank of Wales has also been ramping up its loan and equity investment activities. The bank made 320 micro loans of up to £50,000, totaling £9.9m. The bank's investments have helped support the growth of Welsh SMEs, which play a crucial role in the Welsh economy.

The bank's involvement in private equity investments has also been beneficial for the retail sector in Wales. The bank's investments have helped support the growth of Michelin-starred restaurant groups, which have expanded their operations with the backing of the Development Bank of Wales.

Overall, the Development Bank of Wales has played a significant role in boosting private equity investments in Wales. Its investments have helped support the growth of early-stage tech firms, Welsh SMEs, and the retail sector. The bank's involvement has also helped attract additional private-sector investment, which has further boosted the Welsh economy.

Innovation and Private Equity in Wales

Private equity is playing an increasingly important role in supporting innovation and growth in Wales. According to a report by Experian Market IQ, the number of private equity-funded transactions increased in Wales during 2020. Approximately 28% of all announced transactions through 2020 were funded at least in part by private equity.

Innovation is a key driver of growth in Wales, and private equity investors are increasingly looking to invest in companies that are developing new products and services. This is particularly true in North Wales, where there is a growing cluster of innovative companies in sectors such as advanced manufacturing, life sciences, and ICT.

Private equity investors are also attracted to companies that have relocated to Wales, bringing with them new jobs and investment. For example, in 2022, the Welsh government announced that global biotech company GenScript would be opening a new research and development centre in Cardiff, creating 200 new jobs. Private equity investors are likely to be interested in supporting companies like GenScript as they look to expand and grow.

Private equity can provide the capital and expertise that innovative companies need to take their businesses to the next level. Private equity investors can bring in new management teams, provide access to new markets, and help companies to scale up their operations. This can be particularly important for companies that are looking to expand internationally.

Overall, private equity is playing an increasingly important role in supporting innovation and growth in Wales. As more companies look to innovate and grow, private equity investors are likely to continue to play a key role in supporting their growth and development.

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