The day-to-day demands of running a business often mean that owners find little or no time to consider how to deal with succession planning to optimise their exit from their business. Exit planning is instead frequently triggered by an outside approach, with the risk of an unplanned and compressed process leaving value behind.
The optimum timing for an exit relies on both internal factors and the external market environment; on the internal front factors such as where you are in the company’s growth trajectory, contractual positions with key customers, and whether there are tactical initiatives available to you to rapidly grow revenue and profitability.
On the external front selling when the economy and your particular sector are performing well, domestically as well as internationally, provides a good backdrop of certainty and growth prospects to potential acquirers. Sector consolidation will also fluctuate with time, with high rates of acquisition activity by both domestic and overseas buyers providing optimum conditions for an exit.
External factors such as public company market conditions will impact buyers and the level of prevailing confidence. For plc buyers, the performance of their share price, valuation and access to capital will impact their confidence in acquiring private companies.
In the recent past, the region has seen a number of sectors experiencing consolidation and market activity has been at an all time high with a number of plc buyers acquiring North East companies: In the waste sector, O’Briens Waste Recycling was acquired by Biffa plc this year for £35m as well as the acquisition of JBT Waste by overseas operator Remondis; the recruitment sector witnessed MTrec being acquired by a Japanese listed business for £17m; NECC Training were acquired by Middlesbrough College in the training sector; in the healthcare sector, Quantum Pharma were acquired by Clinigen plc for £150m, Ashchem were acquired by Juno Health and Vocare were acquired by Totally plc for £11m; Litterboss were acquired by Ground Control for £16m in the facilities management sector; and in the chemicals sector, Chemoxy were acquired by French company Novacap SAS.
We expect the levels of M&A activity to remain strong for the foreseeable future. There may be nervousness as we approach Brexit but to date this has had little impact on regional M&A activity.
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