Report: Almost half of middle market firms to seek PE finance

Close to half of middle market businesses in the UK say they plan to seek private equity finance over the next year, with PE firms continuing to be one of the key sources of M&A funding available to businesses amid increasingly tough financing conditions.

The latest The Real Economy Report from RSM UK found that 47 per cent of businesses polled said that they expect to seek private equity funding during 2023, a significant increase from the figure of 36 per cent reported in October 2022.

With economic uncertainty ongoing and inflation remaining high, financing is widely seen as one of the major barriers to dealmaking during 2023. A report from CMS found that 87 per cent of respondents believed financing conditions would become more difficult during 2023, while 45 per cent believed conditions would be much more difficult.

With banks and other traditional lenders likely to be less willing to deploy funds to finance M&A activity, private equity firms - which continue to have significant amounts of unspent capital available since the COVID-19 pandemic – are widely seen as the best route to M&A funding for many firms. In the CMS study, 40 per cent of respondents said private equity would be the most readily available source of M&A financing during 2023.

John Bryant, RSM UK M&A partner in the East Midlands, commented on the findings: "Private equity remains an available source of capital at a time when others may have either delayed their decision-making process or withdrawn from the marketplace altogether.”

“There is currently a significant amount of capital available for private equity investors to deploy, so looking further into 2023 we expect private equity to continue to be highly active in transactions.”

Bryant added: "Therefore, it remains an attractive option for many companies seeking capital to grow, enter new markets and make acquisitions, and seeking strategic partners who can help navigate the current climate."

Elsewhere, the survey found that 28 per cent of middle market firms plan to take out bank loans, while 26 per cent said they planned to turn to the public markets in order to raise funds.

44 per cent of respondents said that making capital investments was the primary motivation to access financing over the coming 12 months, with companies seeking to grow their businesses, improve efficiency and productivity and cut costs.


Read about why M&A can be so important during an economic downturn

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