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Who’s buying UK businesses in 2018?

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Latest market insights on M&A trends in 2018...

A study of more than 1300 acquisitions of UK companies by BCMS has revealed new trends in the market. Here are five insights on what’s happening in UK business sales, to help inform business owners of current activity.

Trend #1: Cross-border transactions

Around 25% of UK businesses acquired in the last six months were sold to an overseas buyer, with the USA leading the pack.

The late 2016 Presidential election subdued transatlantic deal-making for much of last year, but American companies have more than made up for that, acquiring one in 10 of UK businesses sold in the first half of 2018 (see infographic). The comparative strength of the US dollar coupled with close cultural links is continuing to see US corporations and investors snap up UK firms.

European acquirers are behind a further 10% of deals, with France, Germany, Ireland and Sweden leading the way.

Finally, buyers from Asia Pacific account for most other non-UK buyers, with Singapore, Hong Kong and Australia acquirers buying nearly 50 companies between them over the last six months.

#2: Game-changing mega-deals

Several industries have been rocked by mega-deals threatening to upset the natural pecking order in a host of sectors.

For example, Sainsburys £15bn merger with Asda is unlikely to pass regulatory scrutiny until mid-2019, but already we have seen Tesco form a strategic buying alliance with Carrefour in response.

In online payments, the $31bn merger between Vantiv – the US market leader – and London-based global operation Worldpay, has created a dominant player in the retail cashless payments space.

Elsewhere, the merger of GVC and Ladbrokes has changed the dynamic in the world of gambling, with Europe’s third-largest online gambling firm joining forces with the UK’s #1 bookmaker to create a global player with licences in 25 countries.

#3: Funds changing their strategies

Established private equity funds continue to move beyond their traditional comfort zone of consumer and tech firms and are now targeting most sectors of the UK economy, looking for controlling stakes.

New variants of these include activist shareholder Elliott Advisors. One of the world’s most famous hedge funds recently set up a European private equity fund and has acquired leading UK bookstore chain Waterstones, which returned to profitability two years ago.

Multinationals from Nestle to Unilever have recently launched their own venture capital funds to directly invest in UK start-ups, ensuring they get in on consumer trends earlier.

#4: Financial services are hot

Financial services overtook technology as the most acquisitive sector in H1, for the first time in five years. More than 150 financial intermediaries changed hands in the first six months, with huge consolidation well underway among high street financial advisors (IFAs) and regional or specialist insurance brokers.

London’s role as the world leader in fintech is also driving deals, with this hybrid sector attracting attention from financial giants, tech corporations and institutional investors alike.

Technology firms remain very popular, with a notable uptick in SaaS, game apps, and IT consultancies. However, some tech segments are maturing and can no longer command sky high valuations.

#5: Professional services shake-up

Legal and accounting mergers are not a new feature in the M&A market, but recent deals have been worth watching. For example, EY has acquired a law firm to launch a legal advisory service, while PE-backed Baldwins continues to snap up regional accounting brands to break into the ‘Big Eight’.

Why this matters

For those thinking of selling a business, deal-making in 2018 is all about the diversity of options available to owner-managers. Our current clients are working on trade sales, management buyouts and growth investment across dozens of sectors.

Key takeaways

  • Overseas buyers account for 25% of UK acquirers – think globally when planning to sell up, at BCMS in 2018, 30% of clients sold to international acquirers.
  • Large-scale mergers can cause follow-on consolidation for your industry’s supply chain
  • The world isn’t waiting until you are ready – if you are in a popular sector for acquisitions, it’s very likely you will receive an unsolicited approach.

BCMS on-trend deals in 2018

 

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Steve Murphy's picture
Posted Aug 2018
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