We have had quite a turbulent year in terms of stock markets with the FTSE 100 recently falling back below 6000 to its lowest level for 3 years, having reached 7000 in April. We have also seen a slow-down in the growth of the Chinese economy. Despite these factors, M&A volumes, particularly in the mid-market, are being maintained at a high level and there continues to be a good balance between willing vendors of quality businesses and buyers willing to pay strategic prices.
M&A deal volume for the full year is likely to be around 3000 deals. The deals included in this analysis are all deals involving the acquisition of a UK target company and where the stake acquired is 20% or more (as reported by Zephyr / BvD).
In terms of cross border deals, international buyers have accounted for around 25% of deals. US buyers have been most prevalent, accounting for around 10% of all deals. Countries such as Australia, Canada, France, Germany and the Netherlands each accounted for around 30 to 40 deals each.
Deals involving US buyers included Cantel Medical’s acquisition of Medical Innovations Group for US$79.5m. This was an excellent example of a strategic purchase by a US buyer. Other notable cross-border transactions in the mid-market included Indian based BPL Medical Technologies’ acquisition of Penlon, Growth Capital Partner’s exit from Wrap Film Systems to German company Cofresco, and Swedish company Nobia’s acquisition of kitchen manufacturers, CIE and Commodore.
In terms of UK based corporate acquirors, business process outsourcing group, Capita, has completed a number of deals. Lakehouse, the asset and energy services group which listed earlier this year, has already made 5 acquisitions. Other active corporate acquirors have included Polypipe Plc, which listed in 2014 and acquired Nuaire in August for £145m, representing an LTM EBITDA multiple of 11.4x. Earlier in the year, Polypipe acquired Surestop, advised by Bracebridge.
Private equity continues to be active within all segments of the market. LDC are one of the most active investors in the £2m to £100m range, having completed circa 13 new investments in the year to date, together with a number of add-ons for existing portfolio companies.
The Business Growth Fund also continue to be very active growth capital investors for investments up to £10m, having made over 20 new investments in the year to date.
Private equity is also actively supporting buy and build strategies for existing portfolio companies. Archimed’s acquisition of Rehabworks, advised by Bracebridge, was an example of a platform acquisition in the occupational healthcare sector.
Turning to the outlook for 2016, Bracebridge Corporate Finance expect that M&A volumes are likely to remain at current levels for at least the next 12 to 24 months. There will continue to be strong interest from US acquirors and we may also see an upturn in acquisitions by Chinese buyers as they look to diversify away from their home markets. Private equity will also continue to be active, both in terms of new investments and exits. From a seller’s perspective, the M&A market will continue to offer opportunities to achieve a successful exit. However, as always, the key to any successful sale is preparation!
