The Changing Face of Lower Mid-Market M&A

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The IPO tracker from EY has just released figures for 2019 showing yet another decline

Despite raising almost £10B, listings were 56% down on 2018. Only 11 of these were on AIM compared to 35 the previous year.

IPO’s can be expensive, time consuming and with high regulatory requirements but the main reason cited is “geopolitical uncertainty”, and the UK is not alone in this, falling IPO’s or a slow M&A market.

Classic “roll-up” strategies also appear to be not so much in favour, though consolidation is still a key driver. More important is the long term / portfolio approach where synergies can create opportunities – particularly climbing up the value chain – and efficiencies and economies make sense at a head office level. In saturated competitive verticals, particularly service related, looking for product based acquisitions can make a lot of sense for all parties involved, if only it were so simple!

With progress towards reducing geopolitical uncertainty – albeit with little evidence yet – are we expecting a bumper M&A period following years of pent up under investment & lack of willingness to complete transactions? I think so, and this is supported anecdotally in the many conversations I have with business owners and other professional service providers.

Portfolios PE’s in particular have good access to cash but are suffering from a lack of decent opportunities currently. With a base rate reduction mooted as well that cash will be idle at a time when the BoE policy is attempting to stimulate growth.

However, does the fly in the ointment lie on the other side of the pond? If the much-speculated US recession becomes reality it could affect our main source of incoming investment later in 2020.

This Spring could be the best opportunity in a while and possibly for a while.

If you would like to talk to us about your own finance options or exit strategy, email us at: info@thebusinessboard.co.uk or call our office on 0118 338 1818.

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