Insights & News

H1 2019 UK M&A update – trade sales on the rise

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  • UK M&A deal volume up 8% in first six months - 50 companies changing hands every week*
  • Software, insurance and manufacturing see the most action
  • MBOs on the wane as trade acquirer appetite surges

UK SMEs remain at the forefront of dealmaking, with the number of companies changing hands up 8% in the first half of 2019, according to a new BCMS study of the latest acquisition data.

Analysis of completed acquisitions on Zephyr’s M&A database from January to June reveals that software developers, insurance firms, manufacturers, and IT support companies are the most acquisitive sectors.

Moreover, crossborder acquisitions rose slightly from 25% of all UK transactions in H1 2018 to 28% in the first six months of this year, demonstrating once again that Brexit uncertainty has made limited impact on either appetite for quality UK assets or timing of acquisitions.

Of the 1400 completed deals in H1 2019, 100% acquisitions remain the most common transaction type, with ‘trade buyers’ dominating the market at the expense of management buyouts and buy-ins – down from 10% to 5% since June 2018.

Here are five insights on what’s happening in UK business sales, to help inform business owners of current activity.

Trend #1:  Overseas buyers eye busy UK insurance market

The UK insurance industry has been the most active sector for the past 18 months, with high-street brokers, claims outsourcers, and industry specialists regularly changing hands. However, international heavyweights such as Chicago’s Arthur J Gallagher (five UK acquisitions in H1 2019), Bermuda’s Arch Capital Group (three UK deals so far), and Germany’s Allianz – which bought LV’s general insurance operation – shows how quickly market dynamics can change.

Trend #2: Hungry for acquisitions in food and drink

Changing consumer habits remain the main driver for acquisitions in the food and drink sector. Coca-Cola acquired coffee shop chain Costa from parent company Whitbread, and Pret-a-manger acquired rival Eat to convert some of the latter’s estate into its new Veggie Pret store format.

There were even two notable deals in the saturated brewing industry, with Molson Coors acquiring London microbrewery Hop Stuff, and Japan’s Asahi snapping up Fuller’s Brewery, leaving Fuller’s as a pub and hotel operator.

Trend #3: International buyers step up acquisitions

Around 400 UK companies sold to an international buyer in the first half of 2019, compared to 330 in H1 2018. Brexit uncertainty has been mitigated by favourable exchange rates, and there is no change in where buyers come from (see chart).

Examples include China’s Ant Financial Services – affiliated to Alibaba.com – acquiring payments firm World First UK, US broadcast media group Discovery Inc’s purchase of YouTube cycling content provider Play Sports Group, and Swedish cleantech group Absolent’s three UK acquisitions – including BCMS client Kerstar.

This trend is supported by BCMS’ internal data over the same period, which shows that for every four offers we secure for a client business, one of them is from a non-UK acquirer.

Trend #4: Cybersecurity integration gets underway

While low in number, nearly all UK cybersecurity SMEs acquired this year were complementary to acquirers’ core offerings. Cyber is a relatively young industry but is growing quickly and the race is on to offer end-to-end integration for clients. This in turn is driving acquisition strategies. For example, Sweden’s Cyber Security 1 acquired digital forensics expert Intaforensics, and Cyberfort Group made its fourth acquisition, adding Auriga Consulting – a business only established in 2012.

Trend #5: Specialist recruitment in demand

Recruitment has been a steady market for acquisitions for 20 years, although in recent years buyers have become more focused on moving into new niches, rather than new territories. Recruitment M&A is also much more likely to be with a UK acquirer, as seen on Atlas Professionals acquisition of Aberdeen oil & gas staffer Brander, and Barton Partnership’s buyout of executive search specialist Sailing Stones.

BCMS on-trend deals in 2019

*Includes: merger, acquisition, IPO, MBO, MBI, divestment. Excludes joint venture, minority stake (<51%), capital increase.

Steve Murphy's picture
Posted Aug 2019
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