Venture Capital is set to underpin the North West deals market in 2023, following a record year of fundraising, as uncertainty and high interest rates in the debt market continue to dampen the volume of leveraged buyouts.

After Venture Capital Trust (VCT) fundraising reached a record high of £1.13 billion in the 2021/22 tax year, VCTs are expected to continue to deploy capital in 2023, which includes investment in small and innovative North West companies. This is aided by the Government’s decision to extend the tax relief scheme beyond its original 2025 sunset clause, which will help maintain the positive momentum achieved over the past few years.

In the final quarter of 2022, a number of standout deals demonstrated the appetite of VCTs to invest in the regional North West market, contrary to what is perceived to be a London-centric investment approach. This included Manchester-based Summize – a contract lifecycle management disruptor – which secured £5 million Series A VCT funding from YFM Equity Partners and Maven Capital. The investment duo also led a £6.5 million Series A round into biomedical data specialist, Biorelate.

According to law firm, Pannone Corporate, which acted on both deals, VCT fundraising could reach new record levels in the tax year 2022/23, particularly given the sector’s ability to offset subscriptions against income tax – an ability to pay tax free dividends, at a time when Government fiscal policy tightens, especially in relation to income tax thresholds.

Mark Winthorpe, corporate partner at Pannone Corporate, said: “As the deals in 2022 demonstrate, venture capital investment is becoming an ever increasing element of the investment landscape, following a record year of fundraising.

“In many cases, VCTs are looking at a longer time horizon of five to seven years and investment rounds are increasingly done on a syndicated basis to increase the level of investment in the round and diversify a VCT’s portfolio. As such, this patient approach is making funds less susceptible to shorter-term economic and political impacts, with deal volumes also potentially benefiting from any softening of valuations.”

In 2022, Pannone acted on 12 VCT-backed deals, a 50% increase on the previous year. Overall, deal volume increased by 24%, with cross-border transactions continuing to feature strongly.

Other publishable high-profile deals in Q4 2022 included, acting for the management team of training and apprenticeships provider Babington on its tertiary buyout, backed by Unigestion; advising digitisation and data storage business, Storetec, on its MBO, backed by Bridges Fund Management; acting for Maven Capital on its investment through the Northern Powerhouse Investment Fund into British tech-for-good company GWD; advising the shareholders of Inprova Procurement on its MBO backed by NVM Private Equity; as well as acting on the cross-border acquisition of Easyairconditioning.com, advising Beijer Ref AB – a Swedish listed business, which specialises in the wholesale of cooling technology and HVAC.

Tim Hamilton, corporate partner at Pannone Corporate, said: “While uncertainty in the UK economy is putting off some overseas buyers, who have choices about where to invest their funds, there are still those who see a weak pound as an opportunity to acquire businesses in a well regulated market and a mature economy at good value. As such, we expect cross-border deals to remain resilient in the next 12 months.

“In terms of sectors to watch in 2023, big data and data security remain attractive areas for investment, as evidenced by the Biorelate and Storetec deals in Q4. Data security is an area that firms will need to maintain investment in over the course of the next 12 months, given the wider geopolitical landscape, whether that’s in Ukraine, or the growing tension between China and the United States over Taiwan.”

Pannone Corporate has advised on the cross-border acquisition of Easyairconditioning.com.

The Manchester firm acted as legal adviser to Beijer Ref AB – a Swedish listed business, which specialises in the wholesale of refrigeration and air conditioning products. Through the transaction Beijer Ref will expand its international footprint, strengthening its UK presence through the acquisition of the Midlands-based company.

The Pannone team was led by Tom Hall and included Arshnoor Amershi and Bez Borang.

Tom Hall said: “This is a fantastic acquisition for Beijer Ref, and cements its commitment to the UK market, as the company looks to grow its presence through a proven and highly successful network of 70-plus subsidiaries across Europe, Asia, Pacific and Africa. Easyairconditioning.com is a perfect fit for the business and complements its existing network in the UK.

“This cross-border transaction is yet another demonstration of the increasing appetite of large international businesses that have a strategic focus on the UK, using buy and build as an effective way to enter or expand into an overseas market. This has been a popular theme throughout 2022, with Pannone supporting large international clients on a number of significant cross border acquisitions this year, including acting for global cloud platform Esker on its acquisition of a controlling stake in Market Dojo, advising Dutch flower distributor van Duyvenvoorde on a significant UK acquisition and advising Argenbright on its strategic investment in Amberstone Security.

Easyairconditioning.com was established in 2001 and delivers a range of AC and heat recovery system solutions to business and domestic markets.

Christopher Norbye, CEO Beijer Ref, said: “With over two decades of experience, Easy Air Conditioning has accumulated a well-established customer base. They have a dedicated and committed team and we are pleased to welcome Easy Air Conditioning to the Beijer Ref group.”

Shakespeare Martineau (Michael Stace and Matthew Shephard) advised Easyairconditioning.com on the transaction.

Pannone Corporate has advised on the USD $8 million investment into games studio and developer of virtual worlds, Dubit. The multi-million dollar deal will fund the world’s first live esports league in the metaverse, starting in Roblox.

The Manchester law firm acted as legal adviser to Metaventures founder and French investor Jean-Charles Capelli, who led the funding round. The Pannone team was led by Tom Hall (Corporate Partner), Andrew Walsh and Behzad Borang.

The capital funding values Dubit at USD $55 million and will enable the Yorkshire-based company to expand its existing metaverse activity, with the launch of the inaugural Metaverse Gaming League (MGL) – branded gaming events and esports tournaments. Following its launch on Roblox, the company intends to expand into other leading metaverse gaming platforms, such as Minecraft and Core.

Tom Hall commented: “We’re delighted to have worked alongside Metaventures and Jean-Charles in what is a hugely exciting deal in a rapidly growing technology space.

“The metaverse is grabbing both headlines and people’s imaginations, as major players commit to the virtual world. With a strong reputation amongst global brands for its development capabilities, the multi-million investment will undoubtedly provide Dubit with further momentum as it continues to expand its presence in the virtual world.”

Established in 1999, Dubit works with companies such as Disney, Facebook and Lego, and is already taking brands into Roblox. As part of its ambitious growth strategy, Metaventures and Dubit also plan to create consumer lifestyle experiences such as concerts and fashion shows for the metaverse.

Jean-Charles Capelli said: “Dubit is in the perfect position to take advantage of the new opportunities in the metaverse. No other company has 20 years’ experience in developing and launching virtual worlds, combined with a great network of brands and organisations that it works with around the world. As an entrepreneur and musician, I’m proud to invest in Dubit, and I’m excited to help scale up the incredible experiences it creates for users of Roblox and other metaverses.”

Pannone Corporate has acted for the management team, Maven Capital Partners, and Mercia Fund Managers, on the proposed sale of Macclesfield-based fintech start-up, Mojo Mortgages, to RVU – the owner of multiple digital brands, including Uswitch, Confused.com and Money.co.uk.

The transaction remains subject to regulatory approval and customary closing conditions.

Mark Winthorpe, corporate partner, who lead on the deal, commented: “Mojo is fantastic North West success story, demonstrating the significant potential that exists in the regional’s fintech community when you cleverly combine smart technology with market and consumer insight. This deal is testament to the considerable investment and ambition that the team has made in the last few years and is an exciting milestone in the growth journey of the tech start-up.”