The M&A market felt a slowdown in the second half of 2022 fuelled by macro economic and geopolitical uncertainty as well as UK specific political turbulence.
Corporates have however remained active in pursuing strategic M&A throughout the second half of 2022 and this has continued throughout the first half of 2023. The overall impact on the M&A market appears to have been relatively short lived as corporate consolidators continue to develop their acquisition strategies.
Whilst private equity funds are still seeking high quality, good investment opportunities, they are focusing on deployment of capital through existing platform investments which are consolidating through acquisition and have refocused towards buy and build. The risk is significantly lower as many of these platforms have already embarked on an acquisition strategy. Deploying capital through a buy and build strategy can also create significant synergies and economies of scale making consolidators a perfect candidate for a strategic buyer. If you are selling to a buy and build platform, it is important to understand the synergy potential to drive best value for exiting shareholders.
Turning to corporate buyers, there are many different strategies and drivers for corporate M&A including:
Strategic expansion in markets where growth is market-share driven therefore acquirers are seeking expansion through M&A. The waste recycling market is an example of this and is a sector that Cavu have advised on many transactions in, including the sale of J&B Recycling to a European private equity backed operator, Urbaser and the sale of Total Recycling Services to private equity backed consolidator, Biffa.
Acquirers in highly fragmented markets where M&A can be used to strategically grow critical mass. Financial services sectors are good examples of such markets. For example, wealth management consolidator Fairstone has made several acquisitions following the initial investment by Synova Capital which Cavu advised on. The business is now backed by TA Associates and Synova, and recently acquired MT Financial Management and Sacre Associates.
Service expansion can be achieved through corporate M&A. This is often a driver of M&A in the technology, IT services and marketing sectors. In 2022, Cavu advised the shareholders of Intelligence Fusion, a security software platform on the sale to US based and private equity backed Sigma7.
Highly synergistic sectors where acquirers can make significant revenue and cost efficiency gains. Example sectors where this is a driver for corporate M&A includes healthcare. We are currently working on a number of healthcare exits to both trade and private equity buy and build platforms.
We see these themes continuing throughout 2023.
Whilst corporate transactions and buy and builds are likely to continue throughout 2023, there are still opportunities to de-risk and raise growth capital for high quality businesses seeking private equity investment. As an example, Cavu have recently advised on two transactions including, advising management of Mallcomm, a PropTech platform on a buyout funded by Synova Capital and advising the shareholders of scarlettabbott, an employee engagement consultancy on an investment by LDC.
The Cavu team are highly experienced and are able to advise clients on key matters which ultimately drive shareholder value. We would be delighted to meet to discuss your plans and aspirations and how M&A can help achieve your goals.