Figures from the office for national statistics show that in 2016 there were £187.4 billion of successful inward mergers and acquisitions(“M&A”) transactions in the UK, which is the highest value since the data was first published in 1969.
Locally in 2016 we also saw a very active market, with the Shorts deal teamcompleting numerous successful deals involving all types of M&A activity, including complex cross border transactions. So, 2016 was a busy year, but how do we expect 2017 to shape up? Do we expect 2017 to be a record year for the mergers and acquisitions market?
The first quarter of 2017 has got off to a great start, with the Corporate Finance team at Shorts having a record breaking opening to a year with numerous South Yorkshire and North Derbyshire based transactions already successfully completed in the first 3 months. Analysing our own activity, we can see that this has been driven by ambitious UK and overseas acquirers together with an active and favorable funding market. The question is – can this trend continue for the remainder of 2017?
Currently all the short-term signs are positive. Brexit was a worry, but article 50 has been triggered and we have seen no significant changes, whilst the underlying market fundamentals remain the same. Many UK corporates have cash rich balance sheets and are actively looking for acquisition targets to drive growth. Similarly, global appetite for UK assets, only enhanced by a weakened sterling value, is driving cross border transactions, and at increasingly lower transaction sizes. There also continues to be significant private equity capital chasing hard to find high-quality opportunities. This is all leading to a healthy list of potential suitors and the chance to achieve premium prices for people looking to sell their businesses.
This is supported by a generally helpful funding market. Banks continue to have positive credit policies for quality funding propositions, whilst both high net worth individuals and institutional investors continue to search for funding propositions that give competitive rates of return.
Looking ahead
However, in the longer term there may be clouds on the horizon, with the full impact of Brexit and general geopolitical uncertainty having the potential to impact on business confidence and therefore deal activity. Overall, however, I currently see these as slightly longer term risks and I expect the remainder of 2017 to continue to see an active local mergers and acquisition market. This year could therefore be a great time to execute your deal strategy.
Tags: Corporate Finance
