The UK M&A market is showing signs of recovery with the value of deals rising by 63% in the first quarter of 2011, according to the eighth edition of UK Deal Drivers – a comprehensive view of the UK M&A landscape published by PKF in association with mergermarket.
Deals completed in the first quarter were worth £23.2bn compared with £14.2bn a year earlier.
Laura Shaw from the firm’s South West office believes the market is quite resilient despite difficulty in accessing finance from traditional lenders.
An important factor has been rising interest from private equity firms which are providing access to development capital. The market has also been helped by the fact that businesses across the South West are looking at how they can grow and move forward in 2012.
Laura said: “Private equity is definitely coming to the forefront and will continue to do so. There is more financing available from the £2m to £5m level which is typically the size of equity investment businesses in the South West are looking for."
“I anticipate private equity firms with cheques of £2 million upwards will see quite a lot of business from the South West in the medium to long term.
“We are also seeing vendors supporting a real return from management buyouts backed by private equity, where the vendor is being more realistic on price and private equity buyers are looking for solid management teams they want to support.”
For example, Bristol-based Tocris Bioscience was sold for £75m ($140m) in May. It followed an international auction of Tocris by Bristol based Momentum Corporate Finance conducted. The sale represented a bonanza for the management team who bought the business for only £14 million in 2006 in an all-debt deal structured by buyout specialists Momentum.
And earlier this week Call Centre Technology (CCT), the Bristol-based Avaya specialist in business communications, was acquired by Capita Group for £15m on a cash free, debt free basis.
In terms of the next six months Laura Shaw is expecting an improvement in the merger and acquisition market. She says that with businesses having made the necessary cost savings because of the recession people are looking at how to grow with a real interest in achieving this through acquisition.
“On the sell side I think there will be a handful of sales to trade buyers with a continuing uptick in private equity backed management buyouts as owners seek to realise some of their investment from their business," she added.
“Overall I think the market is looking a lot more positive and a number of good deals are likely to happen over the next six to 12 months across the region.”
