Fresh impetus for acquisitions as market uncertainty stimulates appetite for strategic M&A

There’s no hiding from the fact that uncertainty in the UK economy has caused a reduction in the volume of M&A deals done in the last quarter of 2022.

Nevertheless, strategic acquisitions offer one of the most powerful paths to growth, and there are good reasons to believe that 2023 will see a growth in deal volumes involving the acquisition of UK private businesses.

Private company deals are less likely to be impacted than public companies as they are less exposed to regulatory conditions, external investors, and the associated media reporting.

The decline in value of the pound to the US dollar and the Euro makes the UK market more attractive. Strategic buyers will be hunting for synergistic purchases that will help to offset the current market challenges. Our own deals have seen an increase in the number of interested parties from outside of the UK and we expect this to continue.

Sadly however, there are also likely to be more distressed businesses as a result of inflation, particularly related to increased energy costs.

Long established businesses may feel less likely to want to face another recession and, with the cuts to the tax-free threshold for Capital Gains Tax and to tax free dividend allowances, will decide that 2023 is the year to look for new owners, or majority investors.

Despite such external factors however, there remains enormous amounts of “dry powder” available for strategic acquisitions, whether that’s from a financial or trade buyer.

One thing is therefore for sure, deal flow will continue BUT it’s likely that deals will become more complex and due diligence will be even more thorough and consequently lengthier.

For any business owner considering whether or not to seek a full or partial sale of the business, it is more important than ever to get some independent advice. Not only will it provide a guide to value, but it will also clarify the various options available in terms of buyers and deal structures, all of which will inform the timing of the decision to sell.

If you are considering a business sale in the next few years, you will find all the advice you need at our next Masterclass exclusively for owners of private UK businesses, taking place on 16th March at Mercedes-Benz World, Surrey.

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