M&A Mid-Market Polarised but Recovering Well

A recent report from an opportunity matching service has shown some promising if unsurprising trends, and a little bit of useful insight.

From a fairly low sample size there are clear indications that the market has recovered almost to pre Covid levels.  Interestingly the majority of the volume is coming through smaller deals, though that may be more a factor of the community who provided the input.

I would make two distinct but related observations here:

• With one significant exception we are in a fairly normal economic cycle – a proportion of businesses are struggling, a proportion are flying, but for the rest it’s very much business as usual.  What’s changed is that BAU might look different with homeworking & other dramatic changes in dynamics, and the sectors involved (mostly) in the bottom & top tiers have been slightly shaken up.  With a few notable exceptions those that are struggling now were probably not exactly flying before!
• Yes, the interest in acquiring good small businesses is definitely high, but unfortunately the appetite for risk is very low.  There cannot be certainty over what 2020 really looked like as we adapted to lockdown, home working, took cheap debt & benefitted from furlough.  Forecasting 2021 and beyond will not be that different.

The buyers answer to these & other challenges? Leveraged or highly contingent deals with a low percentage of cash on completion.  If you have a good business this is not a good option for lots of reasons I won’t bore you with here.

Unless there is compulsion or (preferably positive) urgency, even as a full time M&A advisor I would suggest you hold on for now, but use the time wisely for a bit of prep for the new normal (and speak to your IFA!)

As always, good luck with everything, stay safe and if we can help in any way we’re happy to do so.

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