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“There have been some big transactions in the last year,” says David Maybury, regional director of Specialist & Acquisition Finance in Yorkshire at Yorkshire Bank’s Leeds office. “But the current climate is unlikely to afford the same opportunities as it did in the first half of 2007. Luckily, Yorkshire is not that reliant on larger transactions.”

Statistics from the Centre for Management Buyout Research show the volume of deals in Yorkshire was down in the last 12 months on the previous year – though not massively. “You’re talking about 80 odd deals as opposed to 88,” says Maybury.

Jeff Holder, an investment manager at NVM Private Equity, agrees that in his part of the market at least – lower mid-market – deal volumes in Yorkshire have been a little more subdued than they may previously have been.

Whereas Richard Feltham, head of Corporate Finance at Garbutt & Elliott, observes deal flow has been sustained in the region, stating that although the current period may not see hugely ‘exciting’ volumes, it is nonetheless stable.

Strategically positioned

That Yorkshire is home to Leeds – the largest financial services centre outside London – a number of educational institutions, including the White Rose universities, a buoyant manufacturing sector and one of the UK’s busiest ports should stand the region in good stead for the year ahead. From financial, academic, commercial and geographic perspectives, Yorkshire is a strategic hub from which to co-ordinate deals.

Yorkshire and Humber ports handle almost 25 per cent of England’s sea freight trade, with traffic set to double by 2016, according to the report Progress in the Region. This goes some way to explaining why Yorkshire has seen faster growth in exports to India than any other UK region – including London and the southeast. The Industry Watch Report published in September by accountancy firm BDO Stoy Hayward revealed that over the past three years exports to India from Yorkshire had jumped 273 per cent.

Yorkshire is also home to the UK’s first new commercial airport in 40 years – the Robin Hood Airport Doncaster Sheffield. And following investment success at Birmingham International Airport where Bridgepoint grew international connections 70 per cent and traffic by 40 per cent over five years, the European private equity firm has bought Leeds Bradford International Airport, investing a further £70 million to provide additional terminal capacity to accommodate an anticipated rise in passenger volumes.

And, perhaps most significantly, rail services on the Leeds to London line make it accessible to the City.

Maybury cites “accessibility” as key to the development of Leeds as a financial centre. “It’s not unusual for trains to London to be full of lawyers advising on transactions involving London and southeast-based companies being worked out of Yorkshire. Leeds has established itself as a financial services centre precisely because it services such a wide geography; stretching as far north as Newcastle, into West Yorkshire, down to Doncaster and outside of the region.”

Second to none

Serious professional services players, such as Deloitte, PwC, KPMG, Ernst & Young, Grant Thornton, Park Place and BTG McInnes to name a few, have established themselves in the region. The investment landscape has also caught the attention of private equity firms ISIS Equity Partners and Key Capital Partners, which have chosen to set up shop in Leeds. Although, according to Maybury, having a physical presence in Leeds is not a pre-requisite to transactional work in the North.

He says there are many private equity houses, VCs and boutiques operating out of London that invest heavily in the region: names like, August Equity, Baird Capital Partners, Barclays PE, Barclays Ventures, Close, Dunedin Capital Partners, Hermes, and Primary Capital.

Andrew Burton, managing director of local VC the Viking Fund and former secretary of the Yorkshire Association of Business Angels (YABA), says that although there are a number of VCs in the area, there is room for more.

“Finding early-stage funding isn’t a problem in Yorkshire, with some start-ups securing pipeline agreements and others benefiting from strong levels of business angel activity. However, obtaining follow-on money, ranging from £1.5-£2 million up to £5 million, is more difficult and there seems to be a gap. This is where the bigger VCs in London come in, but this is not without its difficulties as there aren’t many VCs of that scale with entrepreneurial and technological backgrounds. That’s why we tend to see more management buy-out activity.”

Feltham also speaks of a perceived equity gap north of the £1-£2 million mark. For Holder of NVM Private Equity, this is no bad thing. “When a company reaches funding needs of £2 million-plus that’s where equity investors like ourselves step in to help take the business onto the next level.”

Outlook

Maybury can see strong deal volumes until the end of March. “After that, it becomes a bit hazy, but I can’t imagine things grinding to a halt. Up to the enterprise value of £75 million, I think the market is as active as ever. My expectation is that the mid-market will remain active. It’s very much business as usual and the banks are open for deals.”

Done Deals

On the home front

• In January, family-owned Yorkshire wholesale group Youngs was bought by retail distributor Palmer & Harvey McLane for undisclosed terms to create a UK group with sales of more than £3.8 billion

• Paraytec, a York-based scientific instrument business secured £500,000 in its third equity funding round last December from a consortium, including the Viking Fund, the Viking Club, YFM Group, staff and private investors

• At the end of last year, Sheffield-based timber company Arnold Laver underwent a management buy-in for an undisclosed sum, backed by Yorkshire Bank

• In December, ESS Steels Group, a manufacturer of engineered components for the oil industry in Sheffield, was bought by management alongside a £12 million investment from Baird Capital Partners Europe and £35 million in funds provided by Yorkshire Bank

• September saw the acquisition of Leeds food company Symington’s by David Salkeld and Henrik Nygaard Pade, via management buy-in (MBI) vehicle BPG Acquisitions, with funding from Hermes Private Equity and Yorkshire Bank

Foreign direct investment

• Pulse, a Sheffield-based hydroelectric technology company has this month secured a £600,000 funding package from a consortium of investors, including the Viking Fund and members of the Viking Club, the LIFE business accelerator, Japanese investor Marubeni and private backers

• Belgian company Coil acquired Huddersfield-based Heywood Metal Finishers and Uxbridge-based LHT Anodisors for a combined total approximating £4 million

Cross-border deals

• On 6 February, East Yorkshire-based Fenner polymer technology specialist boosted its US operations with the acquisition of technical fabrics business Prodesco in a deal worth up to £32 million.

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