In the second part of his latest blog, Partner at Livingstone London Jeremy Furniss explores why potential sellers of companies need to be on the front foot as the M&A market recovers.
With several years of growth under their belts and a much greater level of confidence in how their business will perform in the next 12 months, many company owners are now actively contemplating the exit that they put ‘on hold’ during the last five years of market turmoil.
However, while shareholders may be psychologically ready to sell and their businesses performing well, unlocking a successful deal also requires there to be a receptive audience of acquisitive groups and investors, cheque books at the ready.
Recent years have seen UK corporate acquirers focusing their strategic attention and substantial cash war chests anywhere but the UK and Europe. Faced with stagnant local markets but investors nonetheless clamouring for returns, corporates have been chasing targets in growth markets across China, North America and Latin America. What little M&A activity they have undertaken in Europe has been opportunistic in nature – focusing on distressed assets or in higher growth sectors such as Tech.
The pressure on these groups to deploy their capital has been unrelenting, and the prospect of a sustained UK economic recovery and a stabilised Europe is drawing local acquirers back to their home territories.
Surprisingly, the absence of local acquirers in recent years has not necessarily held the UK M&A market back, as overseas purchasers have been taking up some of the slack. A relatively strong US dollar and a more internationally expansive mood among many mid-sized (and therefore very large in anyone else’s terms) but traditionally domestically-focused US groups has meant that advisers may have looked West for new partners for their clients – but with some success.
The welcome return of local acquirers, now jostling for quality local assets with international groups, is giving M&A advisers more scope for creating truly competitive processes for companies that they are selling. More buyer appetite means more traction with better-behaved acquirers and greater scope for leveraging competing interest into great values and quicker processes.