UK Circular Economy Deals Defy Downturn
UK Circular Economy Deals Defy Downturn
- The number of UK circular economy related investments increased by 30% in 2023 to 184 transactions, significantly outperforming the UK M&A market which saw a 17% drop in volume over the same period
- Deal value has also spiked with £1.3bn of disclosed investment in 2023 compared to £879m in 2022, with the average disclosed cheque size up by 15% to £10.7m in 2023
- Venture capital accounted for 58% of 2023 transactions, followed by mid-market private equity, which led one in five investments in 2023
- Industrials and manufacturing is the most prominent sector for circular economy investment for the third year, accounting for just over a third of deals in 2023.
The circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, and recycling materials and products for as long as possible. This differs from the traditional, linear economic model, which is based on a make-consume-dispose pattern.
BDO’s annual Investors in Circular Economy report found that venture capital investors accounted for 58% of 2023 investments with an average disclosed cheque size of £7.9m, up 60% from £4.9m in 2022. Mid-market private equity investors were responsible for 21% of transactions. Growth capital investor, BGF has been the most active UK circular economy investor over a three-year period with 15 transactions and Foresight led the most 2023 deals with five investments made.
Rory McPherson, deal advisory partner, said: “We continue to see circular economy deals out-pace the rest of the UK M&A market. As well as exceptional deal value and volume, we’re seeing many high-quality transactions with innovative businesses right across the UK being backed to support their scale-up journey.
“We’re excited by the level of activity in the sector and its future potential as businesses continue to create value, reduce waste, and drive inefficiencies, as well as driving wider benefits for society and delivering against environment goals.”
BDO’s research found industrials and manufacturing is the most prominent sector for circular economy investment for the third year in a row, accounting for 34% of deal volumes in 2022, followed by TMT at 28% and retail, consumer and leisure at 16%.
Todd Mills, circular economy M&A at BDO LLP, added: “ESG continues to move higher up the agenda for investors as they seek strong returns that also make a positive environmental impact. The economic benefits of investing in the circular economy are clear and compelling. Looking ahead, we expect to see increasing interest from trade investors, with high quality circular economy businesses attracting premium valuations as the competition for assets hots up. This presents an opportunity for financial investors to collaborate with specialist trade players to corroborate circular technologies and business models, reducing risk and increasing confidence of an even more successful outcome.”
ENDS
Disclosed deal value and volume
| Deals | 2023 | 2022 |
| Value | £1.328bn | £879m |
| Volume | 184 | 142 |
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