Mergers and acquisitions up 20% in 2015

The deals market in the South West is set to be the strongest for the last five years, according to analysis of the mergers and acquisitions market by advisory firm Grant Thornton.

Their study of publicly announced deals has revealed that 142 South West businesses are projected to be sold by the end of the year, up from 116 last year and 109 in 2013. This means that the region is outperforming the national deals market, which is projected to be  broadly in line with last year. The number of deals for the whole of the UK is expected to be around 2,800 by the close of the year – a fall of 100 on the previous 12 months.

According to John Panteli, partner at Grant Thornton, the resurgence is a sign that the South West economy is strengthening and business owners and management teams have a renewed appetite to get deals done. “When the recession hit in 2008 the market came to an almost complete standstill and there was a slowdown in deals for several years. During 2015, we had seen a marked improvement but the uncertainty during the run up to last year’s General Election slowed down that recovery.

“Following the Conservatives’ election win, there was an increase in business confidence across the South West. While the deals market has remained strong, the summer has seen a slight fall in business confidence, prompted by ongoing uncertainty in Europe and a possible Brexit. The recent Autumn Statement has also thrown up many new questions, especially over changes to the Apprenticeship Levy.

“However, this uncertainty has been countered by UK interest rates remaining low and wage rises exceeding inflation, both of which drive consumer spending. Funding remains out there for firms looking to make acquisitions and strategic investments, the Private Equity community has an appetite to invest funds and there are signs of capital markets returning to favour.”   

When it came to location of acquiring businesses, most sales of South West firms were to those headquartered here in the UK (80%). Ten per cent of investors were from the United States and the rest involved Swiss, Australian, Canadian, German, Irish, Slovakian, and Swedish companies.

The majority of the deals were acquisitions at 83 per cent, 4 per cent were institutional buy outs, 11 per cent managerial buy outs and just one per cent came as a result of a merger.

“The best advice for any business or shareholder looking to take advantage of the current market conditions, is to plan ahead, whether they are considering a full disposal, Private Equity investment or IPO,” John added. “That way, you can make your business as attractive as possible to a buyer or investor, getting the trading track-record right, strengthening the balance sheet or ensuring internal or corporate structures are appropriate. For those considering a disposal or Private Equity investment, undertaking ‘vendor due diligence’ on your own business gives vendors and management teams greater control of the sale process.”

The number of South West firms acquiring other businesses has fallen slightly this year from 106 to an estimated total of 104. Half of those deals involved businesses outside of the region.

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