{"id":129249,"date":"2018-12-17T15:41:45","date_gmt":"2018-12-17T15:41:45","guid":{"rendered":"http:\/\/chrisw92.sg-host.com\/?p=129249"},"modified":"2024-03-30T11:24:29","modified_gmt":"2024-03-30T11:24:29","slug":"ma-landscape-2018","status":"publish","type":"post","link":"https:\/\/realbusiness.co.uk\/ma-landscape-2018","title":{"rendered":"Why investors are seeing long-term potential in the mid-market"},"content":{"rendered":"
<\/div>

These statistics come to light in the Supper Club’s latest guide, Buy to Build<\/a>,?where one of its partners, Kevin Uphill, analyses the M&A landscape.<\/p>\n

“Aided by a weak pound, British firms are in particularly high demand overseas,” the Avondale founder and chairman reveals. “Inbound deal flows into the UK rose by 69.6% in 2017 in value terms to \u00a3277.95 billion.<\/p>\n

“Investors from China and Hong Kong alone spent \u00a315.1 billion on Britain’s shores in 2017 the highest amount on record, and nearly double the previous year’s total.<\/p>\n

“However, a recent revision allowing ministers to intervene in foreign-led deals may have an impact on deals where the UK turnover of the target business exceeds \u00a31 million.”<\/p>\n

These changes, he suggests, are intended to prevent hostile takeovers by foreign acquirers.<\/p><\/blockquote>\n

There’s another trend impacting the M&A market though one that will have a bigger impact on SMEs.<\/p>\n

Big has proven, and indeed continues, to offer significant advantages for investors. But the frequency of large deals are on the decline.<\/p>\n

“With larger scale deals failing to generate substantial returns over a long period, buyers see the long-term potential in the mid-market,” Uphill says.<\/p>\n

“Increasingly, larger corporates are finding that mid-tier deals offer greater flexibility, as well as an opportunity to capitalise on industry trends and technological advancements.”<\/p>\n

But why is there now more interest inAcquiring or investing in smaller UK businesses?<\/p>\n

Uphill suggests that “while considered riskier at the outset, smaller, strategic deals typically generate higher returns, delivered over a wider time frame.”<\/p><\/blockquote>\n

His analysis is underpinned by a“May 2018 Harvard Business Review report<\/a>. It found thatinfrequent large deals”hurt value creation.<\/p>\n

More importantly, itestimates that small acquisitions boost annual shareholder value by between 8.2% and 9.3% over a sustained period.<\/p>\n

“This is in comparison with the 4.4% average increase produced by so-called ‘big-bet’ deals,” he explains.<\/p>\n

“But it’s not just trade buyers who are dipping their toe in the mid-market. With fundraising at record levels, low-interest rates and a dearth of solid investment opportunities, Private Equity (PE) and Venture Capital (VC) funds are casting their nets further afield.<\/p>\n

“PE and VC buyouts now make up a substantial slice of global deal activity and account for around 15% of Western European M&A deals. Growth equity investments are also growing in popularity. In both cases, there is a demand for mature, high-potential SMEs that can offer a proven track record of growth.”<\/p>\n

The size of an SME makes them more agile. In a changing business environment that has distinct advantages, he adds.<\/p>\n

Of course, many SME business owners still view acquisitions as a potential boon, citing a loss of control as a point of stress. There’s the realisation that you’ve “lost your baby” and that you need to take a leap of faith to start a new life without it.<\/p>\n

But there are rewards to being acquired as an SME. Uphill suggests there’s a sense of satisfaction of knowing that someone recognised the value of the business and the self-actualisation that your vision was justified.<\/p><\/blockquote>\n

It can also be highly financially lucrative and tax effective.<\/p>\n

Now is the time to make of the trend as the prospect of a ?no-deal” Brexit could see the economy slow down.<\/p>\n

This, Uphill says, will cause a short-term recession. The knock-on effect for M&A will be that deal volumes will drop short-term as values fall.<\/p>\n

“However, we predict a short sharp shock and then M&A will hit centre stage again. In slow growth, fast-changing markets M&A is key to companies gaining competitive advantage, shifting their business models and securing shareholder value.”<\/p>\n","protected":false},"excerpt":{"rendered":"

While the number of global M&A transactions rose by 2.9% year-on-year in 2017, the combined deal value actually fell by 2%.<\/p>\n","protected":false},"author":2,"featured_media":139791,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[11052],"tags":[2081,2147,2576],"class_list":["post-129249","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-selling-your-business","tag-brexit","tag-economy","tag-mampa"],"views":2026,"_links":{"self":[{"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/posts\/129249","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/comments?post=129249"}],"version-history":[{"count":0,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/posts\/129249\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/media\/139791"}],"wp:attachment":[{"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/media?parent=129249"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/categories?post=129249"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/realbusiness.co.uk\/wp-json\/wp\/v2\/tags?post=129249"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}