M&A market shows steady recovery

We have witnessed a local recovery first-hand, with significant increases in activity during 2021, and we are working with many business owners who are considering their succession planning options through trade sales, management buy-outs and employee ownership trusts. Others are actively putting plans in place with us to maximise value on exit in 2-5 years’ time.

A look back at 2021

The COVID-19 pandemic continued to present challenges to businesses during 2021. However, business resilience against COVID-19 continued to increase throughout the year, and this is reflected in the levels of Mergers & Acquisitions activity in the UK. Following on from a difficult start to 2020, deal activity picked up at pace from late 2020 into the start of 2021, with a significant number of deals completed prior to the chancellor’s March 2021 Budget amongst rumours of potential increases to Capital Gains Tax (CGT).

With the speculated increases to CGT not forthcoming and indications this is not high up on Rishi Sunak’s priority list for reform, the M&A market has seen a steady recovery to pre-pandemic deal activity levels and beyond. MarktoMarket’s valuation barometer report which tracks the number of deals involving UK businesses on a monthly basis, highlighted an average of circa 460 deals per month for 2021, and that was not including the spike of 713 deals completed in March 2021, once the CGT good news was released.  In 2019, before the pandemic, deals recorded by MarktoMarket averaged circa 360 deals per month, which further emphasises the size and speed of the recovery.

2022 outlook

Going into 2022, the perfect storm of pent up demand and supply for quality businesses is still out there. The M&A market is expected to remain strong in 2022, with sentiment more positive amongst deal makers than it has been for many years according to research by M&A deal sourcing firm Dealsuite.

Positive hygiene factors in the market, such as low interest rates and pressure to deploy capital among private equity firms, will add further fuel to the fire. Many PE firms, funds and large corporates have built up significant amounts of cash during the pandemic and are now ready to spend during 2022 and beyond.

Whilst this is positive for business owners looking to sell, when it comes to the right timing for you and your business, it’s only your view that counts. Whether now or in the future, we’re here to talk things through with you, understand your circumstances and set out your best options. In the meantime, preparation can be made to get ready for a sale, and with that in mind we’ve created an online tool which helps define how “sale ready” you are. It’s quick, easy and free to use and provides immediate results.

If you’re looking to sell your business, please contact the Corporate Transactions Team and we’d be pleased to explore your options with you. Alternatively, you can find contact details in the Our People section of the Larking Gowen website, you can call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Jack Minns