"Across the spectrum, prices are strong and there is lots of capital available"
Entrepreneurs mulling a sale of their business in the next few years should consider accelerating those plans amid a buoyant deals market, says HURST Corporate Finance partner Nigel Barratt.
He told north west business leaders that a combination of timely factors has given rise to a bumper increase in mergers and acquisitions activity.
Nigel gave the keynote presentation at the latest HURST Corporate Finance M&A Update, which attracted business owners from a range of sectors.
He said HURST’s dealmakers were currently busier than at any time in the past four or five years.
The transactions market saw a strong recovery in the final quarter of 2020, and this trend has continued into 2021, driven by proactive buyers willing to pay higher multiples.
HURST clients are regularly being approached out of the blue by interested parties, and Nigel said this has generated huge interest in selling up.
At the same time, the pandemic has brought home to owner-managers across all sectors how their personal wealth is wrapped up in the fortunes of their businesses.
Nigel said ‘the penny had dropped’ during Covid-19 for owner-managers in their late 50s and early 60s, who had perhaps been talking about an exit and had realised that events such as the pandemic create great exposure and risk to their wealth, prompting a desire to sell.
He said attractive target sectors include healthcare and IT, adding that investors are also eyeing Covid-resilient businesses in others sectors.
Those which have coped well with the challenges of Brexit, have reduced costs, found new ways to market or have benefited from a digital transformation are proving particularly popular.
Nigel described how larger, well-funded companies are vigorously pursuing acquisition strategies. Many of them have preserved cash during the coronavirus crisis and have gained access to cheap debt supported by government initiatives.
During the pandemic, they have been able to reflect on their business and assess their strengths and weaknesses, with the result that they are now looking to plug product, service and skills gaps through buyouts as well as aiming to increase their market share.
Nigel said international interest in UK companies remains strong, especially among US, Japanese and Canadian buyers undeterred by the impact of Brexit. Alongside this, EU companies are now seeking to establish a permanent presence in Britain through acquisitions.
Another factor influencing the UK’s M&A market is that private equity investors have significant capital available, said Nigel.
He said PE firms are keen to invest to bolster portfolio companies and create new platforms, while debt and equity funds aim to use their available capital to support early-stage ventures and back buyouts of mature businesses.
“My advice to anyone who’s been considering an exit in the next two to three years is that there may be merits in accelerating those plans, as long as we do get out of Covid and this is the last iteration of lockdowns,” said Nigel.
“Across the spectrum, prices are strong and there is lots of capital available.”