Rob Crews, Partner at Momentum Corporate Finance, looks back on the past 12 months of mergers and acquisitions to highlight key deals and emerging trends.
How would you sum up deal activity in the region over the past year?
Overall 2019 was a steady year for deal activity across the region, although uncertainty around Brexit certainly led to a drop in the number of new deals coming to market after the summer break.
Do you see any particular trends emerging in the future?
With a large commons majority for Boris reducing the level of immediate Brexit based uncertainty, we expect to see pent-up deal activity from the second half of 2019 coming through in early 2020. Given the continued risk of a no-deal Brexit on December 31, we also expect completion activity around the year-end to be subdued as more political gamesmanship plays out.
We also see a continuing trend of private equity funds being able to successfully compete with, and outbid, trade purchasers. There is a very large amount of private equity funding looking to find a good home.
Has the number of deals completed increased or decreased this year, compared to last?
We have seen a record number of deal completions in 2019 as our team has continued to grow. We are also optimistic that, with a very healthy pipeline, 2020 will also be another record year for Momentum Corporate Finance.
For you are there any sectors that are particularly active? And would you say from your experience that deal sizes are increasing?
We advise across a range of sectors, but we are seeing high levels of activity in the cyber security space. This is an attractive sector with strong long-term growth drivers as cyber security becomes ever more critical.
It is also a sector that is attractive as it is largely immune to Brexit risks. As such we have seen strong interest from foreign purchasers (particularly US buyers) interested in acquiring cyber skillsets and positions on interesting cyber security contracts.
Were there any stand-out deals for you in the past 12 months?
There were two standout deals for us in 2019.
Firstly the sale of Deep 3 to CACI. Deep 3 is a fast-growing cyber security business based in Cheltenham, operating in various areas of government and large corporate cyber security. Having run an international auction we were able to sell the business for an attractive multiple to CACI, a large US-based defence prime. This demonstrates the depth of cyber security talent in the region.
Secondly, the MBO of Acquis Insurance, funded by Dunedin (private equity) and HSBC (debt). This was an interesting deal in that this was an entirely management-led process, with a deal value agreed with the vendors and then funded through a competitive process with private equity – a traditional MBO. Management were able to control the selection of their long term funding partner, whilst the vendor deal was delivered smoothly.