Press Room
Signs of recovery for mid-market M&A after sharp drop in
2009
In 2009, the number of announced mergers and acquisitions
(M&A) involving all British targets dropped by 23% to 2,086
deals, the lowest M&A volume since 1994, according to
provisional figures analysed by leading business and financial
adviser Grant Thornton UK LLP*. Meanwhile, the total value of
M&A deals announced in Britain dropped by 33% to £97.6 bn.
Nevertheless, corporate finance advisors see signs of a recovery in
mid-market M&A and are cautiously optimistic for 2010.
"M&A activity in 2009 turned out to be worse than the corporate
finance fraternity had anticipated, but in the UK we see grounds to
be cautiously optimistic about mid-market M&A for 2010,"
commented David Brooks, Head of M&A at Grant Thornton.
"Aside from distressed M&A, there are a growing number of
private company sales driven by a rising level of interest from
acquisitive corporates and a somewhat improved funding
environment," Brooks continued.
"Underlining growing optimism, Grant Thornton's lead advisory
practice has advised on ten completed mid-market M&A
transactions in the fourth quarter of 2009. In December
alone, we have been appointed to advise on eight new
mid-market deals."
Brooks felt that the interest generated by Grant Thornton's recent
mandates was very encouraging. "When Environmental Property
Services plc ("EPS") was sold by our clients comprising Uberior
Holdings Ltd, the EPS senior management team and Alchemy Partners,
the vendors opted for a £38.5m-bid by MITIE Group PLC. The decision
followed a highly competitive auction process which included a
number of strategic bidders as well as private equity
sponsors."
"Another reason to be more optimistic about 2010 is that a rising
number of entrepreneurs are contacting us because of concerns that
the rate of Capital Gains Tax might be aligned to income tax. Many
vendors are considering selling their businesses in the coming
months as they weigh up comparatively low valuations against
the prospect of having their returns decimated by up to 50%
instead of the current 18% CGT levy."
In 2009, the number of mid-market deals (deal value up to £150m)
dropped by 39% to 671 deals valued at £14.2 bn. But a quarterly
analysis shows a steady improvement in the number of deals since Q4
2008, with 196 deals announced in Q4 2009, representing a rise of
11% compared to the previous quarter. The Q4 deal value
amounted to £5.1 bn.
"We continue to believe that comparatively low valuations will fuel
a consolidation drive in the mid-market. At the same time, we also
see an increase in publicly-listed firms considering acquisitions.
While 2009 was about repairing balance sheets with a strong focus
on cash flow and profitability, 2010 will see an increase in
acquisitive listed firms taking advantage of relatively low
valuations. British firms are particularly attractive to foreign
bidders because of the prevailing weakness of sterling."
Foreign bidders only accounted for 610 acquisitions in the UK with
a value of £42.2 bn in 2009, representing a 40% drop in deal volume
compared to 2008, when 1019 foreign inbound acquisitions worth
£72.3 bn were recorded. But a quarterly analysis indicates a
rebound in the number of foreign acquisitions in the UK: 176
foreign deals with a total value of £14.1 bn were recorded in the
fourth quarter of 2009 - 25% higher than the number of deals in Q3
2009.
For further information please contact:
Alex Wessendorff, Grant Thornton Press Office, T +44 (0)20 7728
2048, E Alex.Wessendorff@gtuk.com
*Deal numbers and values are non-seasonally adjusted and based
on announced deals, which offer the most current view of the
M&A market (although not all of these deals will be finalised).
The data is provided by Thomson Reuters on 30. December and
analysed by the Grant Thornton Corporate Finance team.