Deals hit a four-year high in support services

Wednesday, July 04, 2012 | Posted by: Grant Thornton
Categories: Thought Leadership | Tags: statistics, investment, research, report, growth, M&A, acquisitions, financing, Private Equity, transactions, support services, consolidation, corporates, PE

Where is the smart money going in UK business support services? Find out as we reveal the results of our survey of 40 private equity investors active in the sector, their expectations for the next 12 months and some of the key issues affecting the market in 2012.

Since our last support services survey in 2010, recovery has been hesitant. But with 16 deals worth £1.7 billion in the first quarter of 2012 alone, dealmaking in the sector is at its highest level in four years.

As the UK desperately seeks ways to stimulate growth, the support services sector is attracting investment and more than half of our respondents believe the exit market is improving with high expectations for valuations. This bullish view on exits and transactions in the sector supports further growth.

Key findings
Our survey, in conjunction with mergermarket, interviewed 40 private equity investors currently active in the support services sector. We’ve also illustrated the findings in our support services infographic.

• 83% of respondents expect private equity investment in the UK support services sector to increase in the next 12 months.
• Buy-and-build growth potential and recurring revenue streams are the two most important value drivers in the sector.
• 45% of those polled cite the financing environment as the top obstacle facing the private equity community this year.
• Challenging market conditions have caused 95% of respondents to adapt their investment strategies in recent years, largely by focusing on operational improvement of existing businesses (76%) or by seeking buy-and-build opportunities (55%).
• 83% of respondents view business process outsourcing as the most attractive subsector for private equity investment.

David Ascott, Corporate Finance partner, Grant Thornton UK, summed up the report findings as follows:

“While there are increased opportunities in the sector due to an opening up of the market and increased investor appetite, our survey also indicates a note of caution regarding investments over the next year.

“Nearly half of those polled said that the wider financing environment will be the biggest obstacle to a growth in private equity investment, and that regulatory change and budgetary pressures also present obstacles to investment.

“While private equity firms recognise that the year ahead will present difficulties, nearly all of those in the study have already adapted their investment strategies to combat this, largely by focusing on improving existing assets, or looking for buy-and-build opportunities.”

Download the full report
The 32-page report also covers case studies, top deals and factors affecting the market in 2012, such as financing market conditions, exit trends and portfolio company management strategies. It is available for download here: Where is the smart money going in Support Services 2012

For further information on our services in this sector, visit our Business Support Services page.

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