Pitchbook notes that their extensive Country Snapshot series provides an overview of both macroeconomic and microeconomic trends in the region, “covering various countries across Europe.”
Pitchbook researchers look at how “both public and private data points have trended in Q3 for the UK.”
As noted in the update from Pitchbook, private equity markets had significant developments. Following the announcements made in private markets, the British Business Bank (BBB) is now “developing investment vehicles wherein such funds can co-invest into high-growth startups.”
In order to support the cash flows, the BBB has said it will “offer the funds access to some of its older investments where returns and distributions may be more liquid.”
Elsewhere, in Q3, the UK government also “launched the Research Ventures Catalyst fund. The investment amount will be up to £50 million, and the fund will focus on science-based technologies in the early-stage part of the market.
Geographically, the investment area appears “to be targeted to London, bringing into question the regional diversity within the industry and government support.”
The Pitchbook report added that “during the quarter, the Treasury Select Committee published a report on UK venture capital, noting that high-potential firms in other UK regions and nations struggle for access to capital.”
Whilst Pitchbook see other hubs developing “in larger than that witnessed in other European countries.”
After months of sticky macroeconomic data points and low visibility, green shoots may be appearing when it “comes to the economic landscape in the UK.”
Much of 2023 has reportedly involved trying “to call the bottom of valuations declines or the peak of interest rates. Q3 data shows continued signs of cooling, with Consumer Price Index inflation declining to 6.7% and GDP growth to 0.0%.”
However, the report noted that UK interest rates have reportedly continued “to tick higher, with the bank rate at 5.25% in the quarter, and the impact of this continues to be evident in economic data points. More recently, in October, inflation decreased further to the lowest level since 2021, at 4.3%. However, this is here to stay.”
Compared with Q2, the pound depreciated “against the dollar at £1.22 GBP/USD in Q3.”
As noted in the update shared by Pitchbook, the FTSE 100 continues “to lag other European indexes. It is up 5.5% YTD as of September 30, 2023, and 14.7% over the last year almost half the performance compared to the DAX. However, valuations in the market showed some signs of new public listings for UK firms occurred in Q3; both were PE-backed.
However, listing activity on the London Stock Exchange (LSE) still poses long-term
been the choice for prominent tech companies, such as Arm.
Regarding top LP commitments to private markets, they “note some changes to the league tables compared to Q2. As of Q3 2023, over the last three years, BMO Private Equity Trust has had the highest number of commitments to PE funds in the UK, alongside Columbia Threadneedle Investments. In the same period, BGF continues to have the highest number of investments, at 225.”
UK PE dealmaking activity continued to increase in Q3, “with a significant step up compared with Q2. It is a similar story with exit activity, with the listing of Arm skewing Q3 totals upwards.”
Of the top five exits in the UK during the quarter, two were public listings, “with the other being the reverse merger (deSPAC) of CorpAcq.”
The report further noted:
“In Q3, the top deal was the buyout of Worldpay by PE firm GTCR for £10.0 billion. EG Group is the highest-valued PE-backed company in the UK, at a valuation of £15.1 billion. PE fundraising continues to be the bright spot across Europe, and the UK is no different, with capital raised through Q3 already near 2022 levels. This has been supported by megafund closes from Permira and KKR.”
The report added:
“Over the last three years, British Patient Capital has had the highest count of LP
commitments to VC funds in the UK. In the same period, SFC Capital has had the
highest number of investments, at 330, increasing the cumulative from Q2.
UK VC dealmaking activity also continued to inflect in Q3, having been on the rise
since Q1. This area of the venture ecosystem in the UK is showing the clearest
signs of recovery. In Q3, the highest-valued deal was by driverless AI startup, Conigital, with a value of £500.0 million.”
The report also mentioned:
“Checkout.com remains the highest valued company in the region, at a post-money valuation of £29.8 billion. Elsewhere, exit markets continue to be tepid, and fundraising sits at 50.7% of 2022 levels in the first nine months of the year. Of the top five exits in the UK so far this year, none were public listings.”