The market is currently flush with cash, whether from corporates, private equity sponsors or lenders, looking for high quality assets to invest in for growth and returns. In addition, appetite and confidence has not been deterred by the well-publicised economic risk posed by Brexit.
In total, there were 489 UK deals worth nearly £120bn reported in the year, spread fairly evenly over the quarters. This represents c.20% volume uplift on M&A activity levels in 2016. The shortage of assets versus the availability of capital has driven valuations up to a cyclical high-point, averaging nearly 10x EBITDA over the year.
Looking forward to 2018, we do not see these dynamics materially changing, certainly in the first half of the year, and our pipeline of deal activity in the Business Services sector is looking extremely strong across numerous verticals. It is possible that as we approach closer to March 2019 some buyers and investors may slow down investment activity.
Business Services represents the largest part of the UK economy and is a sector in which we produce genuinely world class companies. Because of this it remains an active market for M&A, attracting interest from global strategic buyers and investors. In particular we see the following areas as likely to generate continued high levels of deal activity, buyer interest and high valuations:
- Cyber security consulting;
- Compliance and regulatory consulting;
- Testing and inspection services;
- BPO / procurement and tech-enabled services;
- Trust and administration services; and
- Insurance broking.