The announcement of the Windsor framework and the potential of a new deal with the European Union regarding the Northern Ireland protocol, is further evidence of a more positive view of the UK economy.  The House of Commons Library’s latest report noted that economic data during February have been better than expected, leading to greater optimism over the economic outlook for 2023.

This contrasts the IMF’s recent forecast that the UK is the only major industrialised country to see its economy shrink in 2023. The news of the Sunak-von de Leyen agreement and what it means for access to the Single Market, has sent a positive signal to businesses everywhere.

Importantly, there is hidden in the sentiment a tangible future benefit for British businesses, namely, a potential upswing in Foreign Direct Investment (FDI), and as the old saying goes, a rising tide lifts all boats.

What exactly does this mean for a business owner seeking to explore a sale of their company? For one thing, as sentiment improves and Britain’s closest trading partners experience increased economic growth, individual investors, corporations, institutions and governments alike will all be motivated to seek higher returns on investment, pursuing strategic opportunities in both domestic and foreign markets.

Where does the FDI come from, one might ask? According to the Office for National Statistics, data comparing levels of FDI for the period 2019 – 2021 indicated the UK has seen rising levels of investment from a number of global regions, most notably the USA.

Chart: Shows inward FDI positions for global regions, years 2020 – 2021, in £Billions (source: Office for National Statistics).

Non-European regions have also steadily increased their direct investment into the UK and despite levels declining very slightly in recent years, the EU significantly increased its investment into Britain in the preceding years, between 2018 and 2020 (Source: ONS).

The impact on Mergers and Acquisitions activity

This means that any company sale advisor worth their salt should be considering whether it is appropriate to directly engage with overseas acquirers on their client’s behalf, based on the profile of their business and its sector of operation, the company’s financial health and its customer base.

To underscore this, Kevin Ellis, Chairman and Senior Partner, at PwC UK, commented on a recent survey of CEOs, stating:

“Encouragingly, the UK has moved up one place (in the rankings) and is now the third most important country for growth among global CEOs, joint with Germany, and behind only the US and China. Over the last couple of years, the UK has become increasingly important to global CEOs looking to grow their revenue – in 2020 only 9% selected the UK compared to 18% who selected it in 2023.”

Recent data from Experian also indicates that the appetite amongst overseas’ buyers to transact in the UK was stronger overall in 2022 than in both 2020, and 2021. Based on these findings the USA was the number one acquirer of UK businesses both in 2021 and 2022, which interestingly aligns with the FDI statistics published by the ONS.

Specific Environments, sold to US Cleanroom Manufacturer Angstrom Technology.

Steve Barry, Senior Client Director at EvolutionCBS, has negotiated several significant transactions on behalf of British company owners with foreign acquirers.

“We have extensive experience in conducting desk research that seeks to identify the most appropriate acquirers for our clients, which can include looking at multinational corporations and foreign acquirers from various regions across the globe,” comments Steve.

In 2022, Steve lead the team at EvolutionCBS on the successful sale of Specific Environments Limited, which sold to US Cleanroom Manufacturer Angstrom Technology. Angstrom itself is a portfolio company of New York-based private equity firm ASGARD Partners & Co.

“This transaction highlights the increased appetite for British companies on the part of international acquirers, not only in the cleanroom industry, but for a range of organisations with deep technical expertise. We’re delighted that our Client’s business has become a part of this growing international Group…” Steve said on completion of the deal.

Non-North American Acquirers

There also remains significant opportunities for British company owners to sell to multinational corporations, or organisations located outside of North America. It’s worth stating again that in terms of FDI the EU remains a significant source of investment into Britain, secondly only to the USA.

Since 2021, the team at EvolutionCBS has seen 13% of potential buyers choosing to meet with our clients were located in Europe, and this figure does not include those UK companies that are subsidiaries of multinationals or international companies.

One example is the acquisition of Impact Data Solutions (IDS) by Hexatronic Group AB, a transaction where Steve Barry, Senior Client Director with EvolutionCBS, worked with the EvolutionCBS team to support the interests of the minority shareholders in the deal as a consequence of having initially worked with data centre services specialist IDS in 2019, when it represented the business and its shareholders, successfully managing the company’s sale to Sterlite Technologies.

EvolutionCBS was engaged to provide further advisory services in support of IDS’s divestment from Sterlite Technologies, over a year later, to support the acquisition of a majority stake in the business by Hexatronic Group AB, a supplier of leading-edge fibre technology and solutions.

Interestingly, this transaction involved a UK parent company, selling to a Swedish/Scandinavian corporation. Additionally, the leadership at Hexatronic Group AB stated that their aim was that IDS would work closely with its subsidiary business, US-based Data Center Systems (“DCS”).

Competitive interest is key

Ultimately, it is down to owners of British businesses to seek out, with the help and guidance of a competent company sale advisor, the best possible acquirer for their business. A key component of the sale advisor’s work is to commit the necessary desk research to identify suitable acquirers, wherever they are located.

The advisor must also ensure that the conditions are met to not only generate interest in the business offered for sale, but that there is sufficient competitive tension/interest in the company during the latter stages of the sale process. ■

As a long-established premium provider of business sale advisory services to UK businesses, EvolutionCBS offers business owners a complimentary and confidential discussion on how their specific objectives could be met and provide pragmatic, practical advice on how to begin preparing both themselves and their businesses for a future sale.

EvolutionCBS works with owners of UK businesses in any sector, finding buyers from around the world through highly targeted research and supporting clients with dedicated Director-led teams, at every stage of their journey to a successful sale. 

If you are an owner or shareholder of a business and would like a no-obligation consultation on the sale of your business, please email: info@evolutioncbs.co.uk  or contact us on Tel: 0118 959 8224.