2018 Mergers and Acquisitions Outlook

Our member firm, MHA MacIntyre Hudson’s corporate finance team has had another busy few months, with a number of ongoing transactions, as well as the completion of the investment into Blue Skies by private equity firm 8 Miles, and the sale of CDA Auction Group to Arctos Holdings. The team was recently shortlisted for four of the top awards at the prestigious regional Insider Dealmakers dinner, which was held at the MK Dons stadium. This is the tenth year running that both Laurence Whitehead (Partner at MHA MacIntyre Hudson and Head of the MHA Corporate Finance team) and his wider team have been shortlisted for the Dealmaker and the M&A Team of Year awards respectively. Laurence believes that there is much to look forward to in 2018 for mergers and acquisitions (M&A) activity in the UK despite the continuing distractions around Brexit and wider global issues. Below he outlines why there is good reason to be positive.

“Fundamentally the UK has several unique selling points which stand us in good stead: we have a strong tradition of entrepreneurial drive, a long history of inbound and outbound M&A activity, a deep culture of corporate transparency, creative funding structures, our global language and our robust corporate legal system. In addition to these longstanding strengths, there are also current, very tangible positives for M&A; examples being the low cost of debt finance, corporate cash piles at record highs, over £50 billion of private equity dry powder looking for a home in the UK, and the continuing weakness of sterling, which makes UK assets cheap for foreign buyers.

There are three key areas which will influence the positives outlined above. One is future trading relations with both the EU and the rest of the world, a second one is access to, and retention of, talent, and the third one is capital availability.”

With regard to capital availability, Laurence has seen a fundamental shift in focus in the last year. Governments have been forced to take action to bolster their local economies and stimulate growth through both fiscal and monetary policy. Lenders have come under huge pressure to adapt in terms of both regulation and performance. Lenders have had to re-focus their criteria in order to increase reserves and comply with capital adequacy requirements. The reduction in available credit via traditional sources has opened up opportunities for alternative lenders, who are able to offer a range of flexible funding solutions to corporate borrowers. As a result, Laurence believes that now is a great time to consider your funding options alongside your M&A plans.

Laurence goes on to explain: “Some of the alternative options that we now see are private equity and venture capital funding, structured and asset-backed lending and credit funds, as well as bonds and private placements. All are realistic alternatives to the traditional lenders.”

The key to success for all business owners is the need to ensure that they are ready for discussions with lenders once they embark on the fundraising process. Laurence highlights the following key considerations: “Do you have a healthy, open relationship with your current lender? Does it really appreciate the dynamics of your business? Does it provide expertise that adds value to your current day to day activities? Does it have the expertise and know-how to understand your vision and to help you grow your business? Do your funding facilities provide both the flexibility to support ongoing day to day operations and the necessary headroom to support growth?” If the answer to one or more of these questions is no, then Laurence believes that you should be considering other funding options.

Laurence concludes: “Many challenges lie ahead for corporate UK’s M&A aspirations. However, many of these are of a macro nature and out of the control of business owners. Strong businesses with focused plans and strong management teams will thrive on the opportunities that arise. Indeed, with funding options greater than ever, funding costs at all-time lows and the UK possessing a number of USPs, now could be just the time to push forward with those M&A plans.”

If you have any questions or if you would like some more information, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Corporate Finance team.

This article originally appeared on the blog of our member firm, MHA MacIntyre Hudson.