A year in M&A: 2017 in review – and outlook for 2018
In a year dominated by wranglings over Brexit, and the air of uncertainty and change, one thing has remained constant. In BCMS’ experience, the market for business sales is remarkably strong.
For those selling a business, we have good news. Buyers are still buying, and deals are still being successfully completed across a range of sectors. The characteristics that attract domestic and international buyers to UK businesses are the same as ever: great customer base, added-value services, niche expertise, market positioning and entrepreneurial innovation.
The key sectors for deal-making
BCMS is active across all sectors, but in our completed transactions for 2017, we have noticed sustained interest in technology businesses (such as the Machine 2 Machine/IoT specialist Wireless Communication) and healthcare (including our clients Ashchem Chemists and Direct Medical Imaging).
If you’ll forgive the pun, food continues to be a hot sector – we kicked off the year with the announcement of the sale of energy bar manufacturer High 5, and we are ending it with news of Business Growth Fund’s £8.5m investment in the UK’s third-biggest bakery chain, Yorkshire’s Coopland & Sons.
Software as a Service (SaaS) is another key area for UK M&A, with acquirers understandably attracted by leading-edge innovation, and predictable, recurring revenues. Iris’ acquisition of education app developer Results Squared is a case in point.
What about Brexit?
Brexit is not having significant impact on sales of UK companies. If anything, the level of global interest is up – which certainly offsets some of the downbeat media commentary.
As always, UK companies with a niche, highly specialist offering are prized abroad: think Concise, the event technology company acquired by US-based PSAV, or Intrinsys, Product Lifecycle Management specialists, who were acquired by Sweden’s Addnode Group. For the right business, overseas acquirers are making new strategic moves into the UK, such as French sports equipment company ABEO, who acquired a majority stake in gym equipment supplier Sportsafe. Let’s not forget that around 30% of all our UK clients sell to an overseas acquirer!
Acquirers on the prowl
Interestingly, the level of “seriously” interested potential buyers – that is, acquirers and investors who sign a binding Non-Disclosure Agreement (NDA) with us – has increased steadily throughout 2017. The average number of potential acquirers per project was 27% higher in November than it was in January.
33% of all our deals now feature at least one ‘Looking To Acquire’ organisation as a potential buyer – we define that as acquirers and investors who are actively considering acquisitions, and have directly logged their acquisition requirements with BCMS. We are confident that this will continue for 2018, too. It’s not just us: many commentators outside BCMS are noting a boom in M&A activity.
Wider choice of deal types
Stats and figures only tell half the story, though. Selling a business is fundamentally about people, and the cultural fit between organisations. I’m pleased to report that we have seen a number of client businesses go under offer in the past few weeks, with early 2018 completion dates inked in.
One senior director has said that the BCMS deal pipeline is the “strongest he has seen” in seven years with BCMS, and in the past week we have seen accepted offers from UK and international buyers for businesses in retail consultancy, manufacturing, healthcare and agricultural services. Healthy competition among rival buyers means our clients are able to choose the right deal for them and their staff, rather than one that might look good on paper.
Our forecast for 2018
We expect more organisations to pursue an active acquisition strategy. We expect typical buyer interest per project to continue to rise. We expect innovative, specialist businesses – like leading-edge wireless lens control company RT Motion Systems, say - to continue to attract attention in the UK and overseas.
We expect a strong volume of deals, but also the right deals for BCMS clients, tailored to their individual needs. From trade sale to private equity investment, majority stake sale, to cross-border deals, the range of deal types and options for those looking to sell a business is wider than it has ever been. In simple terms: it’s a great time to sell a business.