Pandemic sees private equity bolt-on transactions jump 35% in 2020

New research by independent corporate finance firm Rickitt Mitchell has found that private equity bolt-on transactions rose 35 per cent in 2020, as the uncertainty of the COVID-19 pandemic prompted PE houses to bolster their existing portfolios.

Rickitt Mitchell’s research, undertaken alongside Experian Market iQ, revealed a total of 370 bolt-on deals completed during 2020, compared to 276 in 2019. However, this increase in bolt-on deals, which have smaller average transaction values, meant that total deal value fell slightly from £1.3 billion in 2019 to £1.2 billion in 2020.

The results also highlighted the resurgence in dealmaking that occurred in the second half of the year: 232 of the deals were completed in the second half of 2020, in contrast to just 46 completed in Q2, during the height of the first wave.

COVID-19 has also driven a trend towards digitisation, with the rise in home working, for example, creating new cybersecurity considerations. This was reflected in Rickitt Mitchell seeing an increased demand for businesses with digital or technological expertise.

Neil Mitchell, Partner at Rickitt Mitchell, said: “Bolt-on transactions have been on the rise for some time, however the significant jump in deals during the pandemic has highlighted the continued appetite by private equity for bolt-ons as a route to growth.”

“Private equity houses have seen the opportunity to strengthen their existing portfolios even further and capitalise on new trends. For example, with the rise in remote working, we have seen appetite for businesses with digital capabilities explode, as more traditional companies look to add much needed technological expertise. We’ve also seen a wider spread when it comes to pricing, with some companies valuations remaining high while others have taken a hit, providing opportunity to target strategic acquisitions at lower prices.”

“As the ‘new normal’ has begun to emerge, we expect both new investments and bolt-on transactions to remain high for the foreseeable future. PE houses are still sitting on large war chests that they need to deploy to satisfy investors, and opportunities will remain for companies to grow dramatically through strategic acquisitions throughout 2021.”


Read more about private equity M&A activity.

Could private equity houses focusing on their existing portfolios contribute to a funding shortfall among UK SMEs?

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