Small- and Mid-Cap Take-Private Interest

In the last year North American and European small- and mid-cap public companies attracted more interest from private equity investors than large-cap public companies.

In its Q1 2024 US PE Breakdown, PitchBook reported that the deal value for European and North American take-private transactions decreased by 50% from Q4 2023 to Q1 2024 and by 75% year-on-year (YoY); however, the total number of deals was only down 5%, from 20 deals in Q4 2023 to 19 in Q1 2024, and down 27% YoY from 26 transactions in Q1 2023.

Peel Hunt also reported in late 2023 that UK take-private interest had seen a clear shift in focus towards smaller, AIM-listed, companies with an average transaction size of £200m for the 12 months to September 2023, compared to an average of £1bn for the previous 24-month period.

As the public markets have struggled over the past two years due to broader macroeconomic uncertainties, public company investors have focused on larger, more established companies, resulting in a funding gap for listed SMEs.

Following the record IPO years in 2021 and 2022, particularly for earlier-stage tech companies, investor appetite waned as many of these companies struggled to meet their targets, and their valuations have continued to fall as a result.

In the face of low liquidity, many of these companies are looking to private equity for an alternative in the hopes that a private owner can provide both the capital and operational support the public markets lack.

For investors, attractive deals can be found on these ‘unloved’ markets, as many small- and mid-cap companies are undervalued or ideal targets for consolidation strategies.

We have previously reported on the benefits of delisting for SMEs that have struggled to find support in the public market in our Mid-Market Bulletin. Our other articles can be found on our website under Insights. For more information or to discuss take-private transactions in more detail, please reach out to us using the email below.