Investment ‘dry powder’ set to fuel business growth in the North West

Despite a challenging macro-economic outlook, Mark Keeley, a partner at ECI, the leading mid-market private equity firm, based in Manchester, believes the North West is well-placed to take advantage of the amount of ‘dry powder’ investment available for resilient businesses with high growth potential.

According to Keeley’s insights, “While there is likely to be low economic growth in the UK as a whole, there will be pockets of high growth, including in the North West.  We are in a period of pent-up demand from private equity, so owners of good businesses looking to attract investment, will find that it remains a seller’s market. The macroeconomic environment is leading investors to increase their focus on companies that demonstrate resilience, not just growth, and those that can display both, remain in high demand but short supply. This means we have seen deal prices stay at historical highs, with fierce competition for the best opportunities.

ECI recently reached the hard cap of £1 billion for its ECI 12 fund, so capital is available to help businesses grow, and the company has an active pipeline in the North West. Current North West based portfolio companies include Moneypenny, a leader in global outsourced communications, based in Wrexham, and Manchester-based companies BCN, an IT and cloud services provider, and Mobysoft, a predictive analytics software provider to the social housing sector.

Growth potential for North West tech companies

In Keeley’s view, “Having a long established presence in the North West creates an exciting opportunity for us given the significant number of quality businesses in the region, particularly in the technology sector, and this is where I see most investment potential. Technology, both software and services, will continue to attract high levels of interest due to the growth and resilience in these subsectors. I also predict increased interest in investment in the Tech Enabled Business Services sector, as businesses use technology to provide a differentiated customer experience and drive high retention.”

Infrastructure investment the key to maximising growth potential

While there may be great growth potential in the North West, in Keeley’s opinion, material investment in infrastructure is needed to maximise this economic opportunity: “From our experience working with our portfolio companies, we know that businesses want consistency of policy and delivery of infrastructure projects that have been promised.  However, my experience is that the region is pushing ahead and making things happen without relying on central Government initiatives.  Personally I’d like to see development of a modern rail network connecting Liverpool, Manchester, Leeds, Newcastle, Hull and Sheffield.

A busier Q2 expected for investment exits

In terms of investment exits, Keeley expects total activity levels to be broadly consistent with 2023, which saw a relatively busy first half of the year and slower second half. This year is likely to be the inverse of this, with the first half quiet and second half busier.  This activity will ultimately be good for business growth and good for the economy.

The general election and a corridor for deals

According to Keeley, “Historically, general elections have led to indecision, with businesses holding off decision-making and investment, which in turn has led to a reduction in investment opportunities. However, this time companies appear to already be considering the impact of potential policy changes and planning for the future, so the slowdown in company sales will probably be less than in other election years.”

 A positive mindset to achieve success

Positivity is crucial according to Keeley: “I’d like to see business leaders adopting a positive “can do” attitude to take advantage of the growth opportunities that exist. This positive mindset has enabled the North West to successfully reinvent itself throughout economic cycles, meaning the region is well served by forward-thinking businesses that have exciting futures both on a national and international level.” 

Key drivers for business success in the North West

In conclusion, Keeley advises: “The economic conditions are challenging, but there are still opportunities for North West companies to succeed with hard work, determination and focus.  Management teams need to be brave and keep looking to the medium term rather than focusing on the present. Those that do this will be really well placed to generate fantastic returns.  An international footprint is helpful, as some economies such as the US, are performing better than the UK, and it can be beneficial to supplement organic growth with strategic M&A.”