M&A market showing 'true intent' for growth

Market conditions are finally starting to align to create a far more suitable climate for growth through mergers and acquisitions. Following years of downsizing, administrations and a prolonged struggle to survive, sustainable growth is starting to look like a realistic goal for the British economy in 2014.

Accessibility to credit has also improved significantly over the past year, while mounting pressure to provide jobs and measurable growth among international competitors are encouraging more and more businesses to stop biding their time and start considering inorganic growth as a viable option.

In fact, figures suggest that 60 per cent of executives in British businesses plan to accelerate their growth strategies over the next 12 months, according to E&Y's recent Capital Confidence Barometer. The study assessed the outlook of executives in the UK for the period between October 2013 and April 2014 and found that confidence is most definitely on the up: “Coupled with positive leading indicators, the greater focus on growth points to a return of increased M&A activity globally.”

But as the market improves, the level of competition is inevitably rising with it. While there has been a number of interesting opportunities that have cropped up in recent months, there has also been a rise in enquiries from frustrated people struggling to get past the initial stage of contact. In fact the UK is shaping up to be more competitive than the global average, with 37 per cent of executives questioned planning on pursuing an acquisition, compared to the global average of 35 per cent. The solution? Up your game and be ready to prove your worth as a suitable buyer before you're even questioned.

Stephen Ideh, acquisition consultant with the Business Sale Report, encourages buyers to be more aggressive and forthwith with information at the early stages of contact, give the hunt everything right from the start.

“Provide as much background regarding your suitability as a buyer as you would expect the seller to send you about the financial history and current status of the target company at present,” advised Ideh.

In addition to preparation, there are some universal truths that will undoubtedly influence how attractive you appear to a seller, as Ideh confirmed: “Cash-rich buyers will always appear more appealing to a seller than those that still require time raising additional funds.”

However, the balance swings both ways and while it’s true that there are more investors competing to buy a business, there are also more businesses for sale. The E&Y paper observed: “[The] 40 per cent improvement in the number of companies expecting to pursue acquisitions resonates from the notable increase in the last 12 months in the number and quality of acquisition opportunities, as well as significant improvement in the likelihood of deal closing.”

Certain sectors are expected to account for a particularly high percentage of these M&A deals in 2014 due to the nature of their expansion. Telecommunications, oil and gas, technology and life sciences are among the areas predicted to show very high levels of deal-making.

From a global geographical perspective, the real competition is returning to the established markets, of which the UK is one, of course. E&Y's findings suggest that mature economies will “attract the majority of acquisition capital over the next 12 months”, with this trend attributed to the growing level of strength in these economies as well as “the perceived safety and quality of underlying opportunities”.

With an increasingly appealing economic climate for acquisitions, buyers are finding themselves up against international competition. Rather than getting boggled by the scale of other buyers, address your own assets and line them up to showcase the unique benefits you can bring to the business. It's also worth reminding yourself not to put all of your hope into one opportunity. Ideh advised instead to “find a number of targets that interest you or meet some level of your basic criteria and be sure to vocalise your interest in other potentials”.

Share this article

Latest Businesses for Sale

View more businesses for sale