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Budget 2015 reinforces Britain’s desirability as a key M&A market

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For UK companies looking to sell, the Chancellor’s 2015 Budget address has reinforced the UK’s position as one of the most attractive markets for both investment and acquisition activity. Key coalition policies, such as the reduction in the rate of corporation tax, and ongoing investments in enterprise, infrastructure and housing are likely to encourage both the economy and deal making activity.

Key points:

Manufacturing and Engineering

British manufacturers enjoyed strong growth over the last twelve months, with the sector benefitting from a continued resurgence, compared with previous years.  The Budget announced a £100m investment to support companies working on driverless technology, including manufacturers and engineers. Support was also pledged for Midlands-based manufacturers operating within the energy sector, recognising the regions contribution to a key segment of the UK’s infrastructure needs.

Jonathan Dunn, Managing Director of BCMS’ Major Transaction team (pictured), comments: “At BCMS we have seen a noticeable Jonathan Dunn Managing Director BCMS Major Transactions Teamincrease in appetite for niche manufacturing businesses, particularly those which employ hard to replicate processes, or supply products that cannot be made elsewhere in the world at a lower cost.  In 2014, we sold three UK manufacturers to foreign acquirers, involved sectors as diverse as defence, rail, automotive, and food processing industry.  We expect this trend to continue over the course of this year.”

In January, BCMS advised on the sale of Nottingham-based TEW Engineering Ltd, who manufactures control panels and display systems, to L.B. Foster Company, a leading North American manufacturer, with locations in North America, Europe and Asia. BCMS is currently managing a number of manufacturing projects and is receiving significant interest.

Energy

New green energy investments were announced, with a focus on the development of tidal lagoon and tidal range technology (the Swansea Bay tidal lagoon was highlighted specifically for investment). 

Dunn comments: “BCMS has historically received strong interest in energy businesses, the sale of Energyexcel LLP being one good example of the types of deals being transacted in the energy consulting space. The announced government investments combined with current energy legislation will undoubtedly continue to drive both investment interest, and ultimately deal making activity.” 

Construction and Housing

The Chancellor announced a further allocation of funding for housing within London, which when combined with new planning powers for the Mayor of London’s office, should assist property developers seeking to initiate long awaited projects in the capital.

Government investment in a range of infrastructure projects, from road building through to flood defence schemes are set to continue, alongside newly announced larger scale investments, such as £7bn pledged for the further development of road networks in the South West of England, and a renewed emphasis on investment in transport links for the cities associated with the ‘Northern  Powerhouse’.

Dunn comments: “Large infrastructure projects will always have a trickle-down effect on SMEs in related sectors, creating confidence and employment. UK infrastructure, with its need for continuous investment and maintenance will continue to stimulate acquisition demand. Construction should remain M&A resurgent, as companies and suppliers benefit from the upswing in activity in that space since 2012. This is most pronounced in the South East, as confidence in the region has returned massively. Therefore the M&A appetite is very strong.”

Foreign Direct Investment

There was much in the budget to continue to attract high levels of Foreign Direct Investment, including maintaining Britain’s attractive 20% rate of corporation tax (which remains well below rates charged in other countries within the G7). 

Since March 1st BCMS has completed five company sales in a range of sectors globally, including the sale of Subtech to James Fisher and Sons PLC valued at up to £18m, and the merger of Cardiff-based Biological Preparations Ltd, a specialist biotechnology company, with Cleveland Biotech, in a Private Equity backed transaction. 
 

 

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Posted Mar 2015
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