Deal or no deal – what lies in store for the mergers and acquisitions sector?

Mark Naughton

Mark Naughton

Following the recession of 2010, many business owners understandably became more cautious; and there was a hesitation to come to market and package for sale, amongst some of them.

But with the economy performing well – all things considered – BLM spoke to business owners and those operating in the corporate finance space to find out what 2017 and beyond will bring.

On the year just gone, Mark Naughton, Head of Corporate Finance at Grant Thornton says: “For us we had a very busy first six-months of the year in 2016, and then the market went a bit quiet; but we’re expecting a very busy first quarter this year and we’re working on four or five deals in exclusivity, that should complete in the next few months.”

Mark says that the money is there for good deals and it is coming forward from private equity, cash rich corporates and the banks – who are becoming more active; and willing to lend to businesses who keep their debt levels down and are asset strong.

He continues: “Interestingly we are also seeing strong overseas interest – three of my deals are international buyers – and this is due to the low value of the pound, which is encouraging firms from Europe, the US and further afield too.”

For buyers, the market is relatively stable at the time of writing, but Mark says that the continued uncertainty around Brexit, a rise in interest rates and any spike in capital gains tax, could all impact this and knock confidence.

The sale of loungers was a big deal in 2016

The sale of loungers was a big deal in 2016

Not just the big deal

With deals at the top end predominantly grabbing the attention – Loungers/Oasis et al – Ned Dorbin, Investor at Business Growth Fund, says that there is a huge amount of activity amongst smaller businesses too, which doesn’t always grab the headlines.

He comments: “We’ve seen a record year, with companies raising money as well as lots of M&A activity. We meet hundreds of businesses each year and there is appetite amongst lots of them to grow ahead of the future sale.

“Some of the most active sectors seem to be IT, manufacturing, technology, e-commerce and the waste sector.”

Regarding the trends for how businesses are being funded, Ned says: “It’s difficult to say for certain as it appears there is a mixture of methods and we only see the equity half of the equation. My feeling is that a lot of businesses are raising money from the banks, with the overall sentiment being that more companies are raising equity now, compared to five years ago.”

Calm before the storm?

Ned is also confident that confidence will remain strong going forward. He says: “Obviously, there are significant factors like Brexit and Trump but they tend to affect the economy at a more macro level and don’t stop businesses growing and investing.

Ned Dorbin

Ned Dorbin

“Most companies we deal with aren’t overly concerned and there are companies forging ahead across multiple sectors. They’re growing successfully and don’t worry about any major headwinds on the horizon.

“Small to medium sized firms have their own challenges and a ten per cent market contraction, for example, isn’t going to have a major impact. It’s easy to say but we’re seeing good deal flow, with lots of successful businesses in the market.

“Of course, it’s not rosy for everyone and we may not see the ones that are struggling, but the immediate future looks fairly bright.”

Early bird catches the worm

Mark also says that it is important for businesses that may be planning to exit, to start the process early and to see an adviser years before they want to ratchet things up.