Lava Advisory Partners has secured £8m in debt financing as US private equity firms increase their pursuit of UK mid-market companies. The boutique M&A advisory firm, founded in 2020, obtained the funding from specialist SME lender Beechbrook Capital. The B Corp-certified firm said it would use the cash to hire more staff and move into a larger office as it plans a phase of rapid growth.
Debt financing preserves employee ownership
"Over the last two to three years there's been so much volatility in the market: we've had tariffs, we've had interest rate rises, we've had political change, new chancellors coming in, more prime ministers," said Lava partner Paul Joyce.
"I think what we're seeing is real pent up demand that's been formed from that uncertainty starting to unleash into the market.
"We're getting a lot of activity and we're finding that our slightly differentiated approach really resonates with owner managers and helping us to beat some of our bigger competitors."
Lava said it considered a range of funding options before opting for debt financing, allowing it to remain fully employee-owned by avoiding equity investment that would be tied to a future sale or exit.
The firm, which has around 20 staff, targets founder-led mid-market companies worth £20m-£200m. It recorded a profit of just under £1m in its latest annual report.
US buyers widen search for UK targets
Joyce said Lava had seen exceptionally high interest in medium-sized UK businesses from US private equity firms.
"There's so much capital in the US trying to buy a relatively small number of attractive businesses that naturally they're casting their net out a little bit wider and the UK is a very natural home for that capital," he told City AM.
Canadian pension funds and private equity firms have shown similar appetite for British mid-market assets in recent years. The flow of North American capital into the UK reflects the deep integration of the two markets.
"You get a US buyer who's keen to deploy into Europe, but you've got a UK buyer who is keen to understand the US market and having somebody with close proximity to that market is really beneficial.
"We think post September, once people get back from their summer holidays, I think we'll see another good run of activity. It's going to be interesting to see the impact of the budget, Andy Burnham's first...but we feel very positive."