Some days over the last two weeks it’s felt like the Harrod’s January sale in the Business & Innovation Magazine newsroom.
Not surprising really, as many businesses looking to buy or sell will have been galvanised into action by the looming budget and a fear of a hike in capital gains tax (CGT). There had been whispers that the chancellor would raise the 20 per cent rate to bring it more in line with income tax rates, but that didn’t happen. Many think that big changes in CGT and inheritance taxes will come later this year.
We’ve reported on more than a dozen significant regional mergers and acquisitions, large and small this week – from multi-million-pound deals which have been months, sometimes years, in the making, to sales of smaller businesses, where no deal price has been mentioned and we wonder whether it’s the pandemic which has driven the owners to exit a business quicker than they might otherwise have done.
Most finance and legal professionals expect this M&A trend to continue to rise sharply (You can read the report on Mergers & Acquisitions in our March 2021 issue, OUT NEXT WEEK).
Accountants Hazlewoods Corporate Finance Partner, Paul Fussell, said: “Although some deals were put on hold because of Covid-19, others continued with their buy and build strategies.
“By the end of last year we had seen a strong recovery in the M&A landscape, with deal volumes bouncing back to pre-pandemic levels, helped in part by sellers fearing possible changes in CGT tax rules ahead of the March budget.
“The outlook for 2021 is already looking strong.”
The resilience of the UK’s mergers and acquisition market is also clear in a new M&A report published by market researchers Experian.
In 2020, deal volume approached pre-pandemic levels in the final quarter of the year and a flurry of multi-billion-pound acquisitions towards the end of the year meant that annual transaction value eventually eclipsed that of 2019.
Tim Ward, Tim Ward, head of corporate in law firm’s Harrison Clark Rickerbys Cheltenham office, said: “The market remains busy. Businesses are looking for opportunities despite the challenges of lockdowns and Brexit.”
According to global consultancy Bain & Company, M&A activity is expected to spur 45 per cent of revenue growth over the next three years, up from 30 per cent over the past three years.
One of the biggest deals we reported on this week was yesterday’s announcement that Stonehouse telecommunications business 9 Group had been bought by Fareham-based OneCom. This was the second major acquisition for Onecom, which is backed by the mid-market private equity business LDC. Just three weeks ago the company scooped up High Wycombe-based Olive Communications. While the sale prices for both companies have not been disclosed, these will have been two of the higher value deals in the region recently.
LDC was busy again on Wednesday, when we reported that Stuart Turner, the Henley-on-Thames based water pumps and systems manufacturer, which it is backing, had bought pressurisation and HVAC specialist Mikrofill Systems Ltd.
On Tuesday Corporate finance company FRP announced it had acquired Reading-based Spectrum Corporate Finance in a deal work more than £9 million, and the week kicked off with the news that Cricklade-based GWP Holdings Limited the owner of GWP Group Limited, the protective packaging manufacturing and distribution business based near Swindon, has been sold to a subsidiary of Glasgow-based Macfarlane Group plc.
Pulse Power and Measurement Limited’s (PPM) technology has the potential to increase the speed and ease of sharing large volumes of data over a network, giving users greater ability to exploit that data. As volumes of data grow, this ability is crucial to give military and security customers an information advantage.
Hazlewood’s Paul Fussell added: “There is a lot of consolidation going on in some sectors. Private equity houses are looking for solid business to back, often as part of a “buy and build strategy”, and trade acquirers are continuing to make acquisitions to consolidate and grow, especially where organic growth is difficult.”
One sector which is enjoying major investment volumes is UK FinTech.
In January we reported that the UK FinTech sector has retained its role as the top-ranking investment destination in Europe, with $4.1 billion venture capital and growth private equity invested across a total of 408 deals. While this represents a year-on-year drop of nine per cent, given the global Covid-19 pandemic and the surrounding economic challenges, it’s not surprising it wasn’t more.
Globally, the UK ranks second only to the US in total capital raised. The UK has more than 10 per cent of the global market share in fintech and the sector is now worth more than £11 billion a year to the UK economy.
Last month an independent review set out a plan for the UK to retain its global leadership in fintech by helping the country’s financial technology firms to scale up, access the talent and finance they need, and deliver better financial services.
The independent review, led by British entrepreneur Ron Kalifa OBE, presents a wide-ranging strategy and delivery model to build on its existing attractiveness to start-ups firms and become the best place for a fintech business to reach global scale.
by Nicky Godding, editor in chief of Business & Innovation Magazine