There are signs of recovery in the mergers and acquisitions market in the North East. Paul Mankin corporate finance partner at PwC, takes a look at the first quarter of 2011.
AT the end of 2010 confidence in the local merger and acquisition marketplace showed signs of returning, evidenced by the completion of some significant acquisitions and refinancing deals in the region.
This continued into the new year as the backlog of deals finally started to come through.
Although the underlying figures show an increase in the volume of transactions to 37, the value of these deals has been significantly inflated by the completion of two particular transactions to over £1.13bn.
In September last year, Newcastle-based Wellstream announced that it had received a number of bid approaches. GE emerged as the successful bidder and following two previously rejected offers agreed a deal valuing the oil services company at £800m. The deal completed in February.
Wellstream listed on the London Stock Exchange in 2007 with an initial market capitalisation of more than £300m; this provided an exit for Candover Investment Partners who backed a management-buy-in four years earlier in 2003.
Wellstream has manufacturing sites in Newcastle and Brazil.
A complex negotiation culminated in the disposal of certain assets of Teesside Cast Products (TCP) by Tata Steel to Thailand’s largest steel producer Sahaviriya Steel Industries in March. The steel plant, which was partially mothballed early last year, will be brought back into full operation. This transaction was reported to have a value of £290m.
Other cross-border trade sales of North East businesses in the first quarter included the acquisition of Metal Spinners Group by US-based Standex and the disposal of Melbourne Holdings, the holding company of North Eastern Tyre and Exhausts (NETE), to Stapleton’s Tyre Services which is owned by the Japanese company Itochu Corporation.
A number of deals which were announced during 2010 finally completed during the first quarter of this year.
In addition to Wellstream and TCP, the disposal of 77 convenience stores by Mills Group to Tesco subsidiary One Stop was finally cleared by the Office of Fair Trading in March.
Last December, Aesica announced it had signed contracts ahead of acquiring three manufacturing sites in continental Europe from UCB. The deal, which completed during the quarter, was the first by Aesica outside the UK and will almost double the capabilities of the business.
The company is a supplier of active pharmaceutical ingredients and formulated products to the pharmaceutical industry
North East plc Grainger, the specialist residential landlord, continued to expand its portfolio with two acquisitions during the period.
Likewise, Pyeroy bought two businesses and expanded its geographical base. The industrial services group, which employs more than 1,000 people, acquired Cork-based CEI in January. In the same month it acquired the scaffolding assets and a number of ongoing contracts from Spectrum Access which was in receivership.
Tyneside shipyard A&P Tyne was acquired in March by Atlantic & Peninsula Marine Services, a consortium whose shareholders include Peel Ports, existing investors and directors of Cammell Laird. A&P Group owns three ship yards in the UK, two in the North East and one in Falmouth.
The second half of last year saw the return of private equity to the region with three significant investments. Although there was limited venture capital activity during the first quarter of 2011, the signs are positive going forward. Nationally the British Venture Capital Association has designated 2011 as the year of venture.
Deal flow during the first quarter of the year was encouraging and, although it is too early to predict a return to historic deal volumes, confidence in the market is returning.
:: Click here to view the Deals Survey: Quarter ended March 31 2011
