The M&A market in 2023 was fuelled by corporates who remained active in pursuing strategic M&A and this appears to be a key theme which is continuing into 2024.
The drivers of corporate M&A activity are largely twofold:
1) The UK continues to be an attractive market for overseas acquirers, influenced by many factors including exchange rates, access to new geographies, services, talent and technology. Overseas acquirers are therefore still keen to continue acquiring quality UK businesses.
2) Private equity investors have backed businesses to continue to seek bolt-on acquisitions which enhance scale, expand service offering and are highly synergistic. The strategy is for private equity to position these consolidators for exit.
There has also been a trend of pre-emptive approaches, primarily from buyers seeking to circumvent future sale processes and with the right positioning, they are willing to pay tomorrow’s value today.
For shareholders, it is important to start planning your exit at an early stage and there are many different factors to consider, including:
Considering the exit avenues for your business – it is important to consider your exit avenues and the attributes of the eventual buyer which will help inform on business strategy and positioning the business to a buyer. Considerations include: is the buyer operating in the same sector, which type of buyer is most likely to find your business attractive and how does your business fit a strategic gap in the buyer’s business.
Positioning your business for a buyer – this is a crucial point which shareholders should consider at an early stage. To generate maximum value, it is very important to ensure that the business is positioned appropriately including understanding and eventually articulating specific synergies with a buyer. This is a vital stage when considering an exit and will ultimately help strategically position your business in the best possible way to drive a premium multiple and valuation.
Identifying potential transaction issues – it is important to anticipate potential transaction issues which could arise during a transaction. This will ultimately give you time to rectify any issues which could lead to a smoother sale process. Such issues could be trading related such as high customer concentration, contractual matters in customer or supplier agreements and solving issues with staff and/or succession.
It is important to consider appointing an adviser early on as exit planning requires careful and due consideration around a number of areas which could be strategically important and give you the best chance to obtain a successful result with maximised returns for shareholders.
Over the last decade, Cavu have advised shareholders across a variety of deal types and engaging early with shareholders ultimately gives the best chance of a successful sale. Our flexible approach means that we work with clients for several years to eventually achieve an optimum exit. We would be would be delighted to meet to discuss how we could advise you in such instances and how we can help you achieve your goals.
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