It would be a brave person to predict the M&A market however there are certain trends we are seeing that indicate significant change in the marketplace, with a distinctly international flavour.
Change is a trigger for strategic decision making where businesses should review their current position and act accordingly. The early movers are ahead of the curve and can often reap the rewards of the opportunities that change brings with it; there is little doubt that it is becoming a constant in the UK business landscape.
Uncertainty or opportunity?
CLB Coopers has had a busy year so far delivering a record year in terms of M&A deal value that we have advised on with our total deal value in the past twelve months topping £200milion. This is against an uncertain backdrop of Brexit, a minority Government, record low interest rates during the period and poor exchange rates for imports. Despite this ‘uncertainty’, it seems that the UK is an environment of opportunity for dynamic businesses with a clear business strategy and strong management teams, or for oversea businesses to establish or build their UK presence.
It seems those who take a proactive and positive approach to change are the ones who are shaping the UK into the next chapter, be they acquisitive UK corporates, MBO teams or international buyers. We have worked with all three in the last few months, particularly regarding disposals to USA and EU-based acquirers, and with highly credible MBO teams who have an increasing range of funding options and providers open to them.
US buyers have been acquiring on the basis of seeing the UK as a logical landing ground for their expensive wider forays into Europe, buying up former third-party distributers or acquiring key UK technology and IP, and EU-based businesses wishing to capture a UK supplier or complementary income stream to strengthen their pan-European operations, despite the uncertainties over what Brexit will deliver.
All have involved robust UK businesses attracting exit multiples.
Availability of funds
Historically, funding has been more of a barrier to change. However, we are currently seeing an influx of new funders or funding products along with the traditional funders with an increased appetite to fund growth. ‘Challenger’ banks are becoming more active in the market and along with new entrants into the ABL and private equity area, more and more funding options are now available:-
Development capital – given low returns delivered by banks to investors, there is a huge array of funding options from debt and/or equity providers
Traditional debt finance – more readily available with EBITDA multiples of two or three times the ‘norm’
Alternative debt finance – looking at new and innovative funding steams to address companies’ requirements that do not meet those of the more prescriptive debt providers
Private equity (PE) – more PE houses in the UK, and North West in particular, with significant unspent funds and an appetite for technology-led niche businesses
Overseas investment – the UK is seen as a sound investment and, with Brexit looking, it seems overseas businesses are keen to have a UK presence ‘on the ground’ and vice versa
High net worth individuals – family offices are looking for investment in the UK SME market
More and more funding providers are opening their doors in the UK and with interest rates remaining low, are being raised at greater values and frequency then seen previously.
Relevance to your business
Businesses with clear strategy and competitive edge have become increasingly attractive as acquisition targets, as trade buyers and PE houses seeks to consolidate their sector positions and enhance the quality of their earnings. the majority of disposals we have concluded in the last twelve months were the culmination of months and years of planning and helping shape the businesses to optimise shareholder value, creating appropriate corporate structures and developing a range of options to shareholders to proactively realise value.
On the acquisition and MBO fronts, the presentation of clear business plans, supported by robust financial forecasts, has been key to securing funding across a range of sectors, with a common theme of each opportunity having multiple competitive funding offers to choose from – a somewhat changed landscape from three or four years ago.
Our ethos is to look at each business ‘in the round’, ensuring the tax impact and interactions between taxes is rewarded as part of any future plans.View all insights