M&A Market Snapshot Part 1: Sellers Get in Line

In the first of two blogs, Partner at Livingstone London Jeremy Furniss looks at why company owners should be optimistic – but not complacent – about the prospects for selling in 2014

There is a growing base of evidence – and more importantly confidence – that the window for transactions is now opening. A flurry of successful IPOs – London estate agent Foxtons being the latest – and growing momentum behind a UK economic recovery are creating a much more benign environment for entrepreneurs to contemplate selling their businesses.

Increasing acquirer stability

Three factors are driving greater interest among potential sellers. Firstly, an increasing number of companies can now point to two years of sustained turnover and profit growth from a low point in 2010 and further progress in 2013. This provides a firm foundation for launching a transaction.

Increasing seller confidence

Secondly, owners are looking forward to the next 12 months with a far greater degree of confidence that they will not trip up mid-way into a sale process, always an adviser’s greatest concern. Order books are filling, enquiries are up and the recovery in the UK and across Europe supports an outlook of sustained growth.

Lastly, many potential sellers aren’t getting any younger. There is a generation of business owners who had expected to retire or otherwise exit their business in 2008 and 2009, only to find the markets closed and no choice but to ‘hold the fort’ until it opened again.

Getting to the front of the queue

Well, the market is opening for business and the prospects for the M&A market in 2014 are promising indeed. However, committed sellers must be ready to muscle their way to the head of a long, long line of other company vendors, all equally eager to realise their years of hard work into hard cash.

And many strategic buyers, after an extended period of little or no M&A activity, have a much reduced capacity to process multiple acquisitions compared to the peak deal years of 2006 and 2007. As their appetite for M&A increases, this capacity will grow but 2014 is likely to be a year in which strategic buyers will quickly get over-stretched.

Prospective sellers should take note of the old adage that the early bird catches the worm. Being one of the first available opportunities when the M&A market accelerates in 2014 could be the difference between a quick and prosperous exit, and becoming stuck in a glut of other deals. As a typical sale process can take six to seven months to conclude, it is critical that business owners contemplating an exit in 2014 start putting into place the building blocks for a successful transaction now.

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