The low point for the UK’s M&A market? Experian’s 2019 M&A review

Experian’s recently published annual M&A 2019 review revealed that UK deal values were down 43%, whilst volumes were down 13% on last year’s figures. This was perhaps inevitable given the unsettled UK political environment, especially in H2, and the global geopolitical landscape which caused greater caution amongst deal makers; this was particularly marked in the mega deals segment which suffered a £1bn drop in deal value year on year.

Private equity was again prominent in 2019, continuing the strong trend that’s been established in recent years and which is expected continue into 2020. The abundance of, and appetite for, private equity funds meant around a fifth of all 2019 deals utilised it.

Sectors and geography: the peaks and troughs of the M&A landscape

The financial sector, responsible for 25% of all 2019 deals, continued to flourish, closely followed by the infocomms sector; both sectors experienced robust deal activity despite a fall in both value and volume. Healthcare was the only sector to increase its deal volume over 2018.

The South remained the most active destination for recorded deals – with London, the South East and the South West combinedly responsible for 60% of total UK deals by volume, and 83% by value.

In the Midlands, 2019 deal volume declined less sharply (by 8%) than the national reduction of 13% - to just below 1000 deals - whilst deal value fell by 27% to £15.9bn. Overall, the region accounted for 14.3% of all UK deals, making it the busiest region for deal making outside of London and the South East, albeit only representing 7.7% of total UK deal value.

So, what now?

Fast forward to today, a more powerful UK government and a slightly clearer picture on Brexit means the UK continues to house some of the most reasonably priced and forward-thinking businesses in the world. This is likely to boost M&A in 2020 and inevitably highlights the UK’s position on the world stage as an attractive destination for global investors.

Although deal activity undeniably slowed in 2019, with almost all sectors experiencing a downturn in both value and volume, the consensus is probably that the UK’s M&A market is now starting to show signs of buoyancy as companies jostle to take advantage of opportunities.

Midlands top-10 advisor

Experian’s report showed Smith Cooper Corporate Finance (SCCF) retained a top-10 Midlands ranking, a hard-fought position held for some years now.

Recently, SCCF was involved in the landmark sale by Crosslink Technology Holdings of Silentbloc UK Ltd to Dellner Bubenzer Group of Sweden and Icon Aerospace Technology Ltd to US based IPS. Silentbloc specialise in vibration control and the acquisition accelerates Dellner Bubenzer Group’s strategy of seeking growth and new market opportunities for their polymer solutions business.

SCCF also recently advised the shareholders in the sale of Prime Principle Limited, developers of the Classroom Monitor tool used to track pupil progress in around 1,500 schools, to Juniper Education, increasing the number of schools using the latter’s solutions to over 7,000.

John Farnsworth, Partner and Head of Corporate Finance at Smith Cooper commented “The paralysis caused by an impotent government and Brexit uncertainty in H2 2019 definitely impaired dealflow by slowing transactions to a caution-induced crawl – although the number of assignments we signed-up showed no deterioration at all.

Whilst some caution and uncertainty remain, a stronger government with a clear strategy on Brexit (whether one supports that or not) is strengthening confidence and paving the way to a clearer future for UK businesses. We expect to complete more deals in 2020 compared to 2019, which hopefully marked the low tide in UK M&A”.