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Overseas corporations more likely to acquire SMEs than a local competitor

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Smaller UK firms are more likely to be bought out by overseas acquirers than local competitors, new BCMS research has found.

Our study of more than 500 selected transactions over the last 15 years found that 25% sold to international corporations and investors, compared to just 20% who sold to an acquirer from the same region.

SMEs in eastern England, the East Midlands and Scotland were most likely to sell in a crossborder deal, with one in three selling to an overseas buyer in the £1m-£50m deal range.

The USA has long been known as the world’s most acquisitive buyer of overseas businesses, and accounted for 42% of cross-border acquisitions of UK SMEs in the survey. However, European acquirers were evident on 43% of overseas completions, while emerging market economies such as Thailand, India and South Africa have also increased their UK market presence through SME acquisitions, accounting for 15%.

The data confirms the industry view that traditional business valuations and local marketing of businesses for sale – although still popular among high street accountants – is on the wane.

BCMS examined a selection of 500 completed UK deals worth £2.9bn between 2000 and H1 2016, with the following key findings:

  • Local versus global – 126 acquirers were headquartered in another country, compared to 100 buyers based in the same UK region. Intra-regional acquisitions were slightly more likely in Wales and North West England than the rest of the UK.
  • National footprint – national expansion remains a major deal driver for larger enterprises buying UK SMEs, accounting for 54% of all completed deals. The South West and North East of England are hotspots for this kind of deal, although accessing the London market is also important for many UK acquirers
  • Hot industries – UK aerospace, healthcare and software businesses are favoured by US buyers, while European acquirers are more likely to buy industrial SMEs
  • The top 10 overseas acquirers of UK SMEs were (in descending order) USA, Germany, Netherlands, France, Ireland, Italy, Canada, Switzerland, Japan and South Africa.

BCMS SME insight deal types

The findings also support our view that business owners preparing to sell or seeking investment need to think globally, and remain open-minded about potential buyers, which not only increases sale-ability, but creates competitive bidding to maximise value. 

Posted Sep 2016
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