A post-election boost has helped drive a busy summer in the deals market, with the corporate finance team at business advisors Grant Thornton UK LLP reporting a significant upturn in activity.
The firm, rated number one in the UK by Experian Corpfin for the last three years on the basis of deal volumes, completed 18 transactions around the country over June, July and August.
The total value of the deals was £426m. By sector, business support services, consumer products, and technology were the most active. Some 39 per cent were cross border deals, facilitated by Grant Thornton’s global network.
These included the team advising Dutch-based Didix BV on the sale of the UK’s number one and two discount diners clubs - tastecard and Gourmet Society, based in Huddersfield and Stockport respectively. The business was backed by Waterland Private Equity and sold in August for an undisclosed consideration to Bridgepoint Development Capital.
The Grant Thornton team also supported Sovereign Capital on its £18.4m public-to-private takeover of Synarbor, the Sheffield-based education recruitment business.
A further stand-out deal in the period was Grant Thornton advising London-based Global Group (UK) Limited, a healthcare business specialising in locum doctors in UK & Ireland, Australia, New Zealand and Canada on its £37m sale to Impellam Plc.
“A year ago it felt like the starting gun of the recovery had been fired but then the election slowed things down,” commented Andy Morgan, a partner in Grant Thornton’s national corporate finance team. “There’s been a collective sigh of relief that it’s out of the way. People are in the mind-set to do deals. The turmoil in the equity markets at the moment doesn’t reflect the M&A reality that deal flow is strong and pipelines are good. There remains a mountain of cash on corporate balance sheets that needs to be deployed and the debt markets are highly liquid again for the right leveraged deals. Searching for organic growth on global markets is still quite challenging for lots of businesses. That reality is making boardrooms look more aggressively at strategic acquisitions.”
The summer activity levels have demonstrated that sentiment towards UK Plc remains positive, he added. “There’s an increasing trend for the UK to be a destination choice for overseas buyers, and most recently Far Eastern acquirers. The UK continues to be seen as the prime entry point for the EU. Economic conditions are encouraging, the flexibility and talent in the workforce and a favourable tax regime are supporting the premium currently evidenced for UK M&A deals relative to much of the rest of Europe.
“Within that picture there are market hotspots. We are seeing a lot of activity in the London financial technology (FinTech) market where the UK can rightly claim to be a global leader. In 2014 the UK attracted 42% of all European FinTech investment and Prime Minister David Cameron has spoken of his goal of creating 100,000 jobs in the sector. In addition specialist staffing and human capital businesses, which have been at the front end of the economic recovery, have been attracting much M&A activity."
Andy Morgan also cites strong valuations as a factor driving deals. “It’s a good market for sellers right now. Growth is being priced into valuations. There’s more willingness to pay tomorrow’s price today for the right asset. That’s partly about good business fundamentals in the UK, but also a reflection of the amount of capital looking to be deployed into particular types of deals which is driving up prices. Buyers are prepared to pay a premium for quality.
"A lot of activity has also been driven by Private Equity exits – a recognition that this is as good as it gets for realising value” he added. “Numerous PE-owned assets have come to the market in the last 12-18 months as pent-up demand has been released.”