The resilience of the UK’s M&A market was clear to see in 2016 with the Experian MarketIQ for 2016 revealing a record year for M&A activity. The number of transactions announced reached a staggering 7,155, making 2016 the busiest year in terms of transaction volume since 2007. Meanwhile, the total value of UK M&A reached £283 bn, allowing the UK to sit comfortably as Europe’s most valuable marketplace. These figures provide evidence that the M&A industry is experiencing a boom period which we expect to continue in 2017.
The number of deals involving acquirers from overseas has remained consistently high at a 7% year-on-year increase. The growth in inbound acquisitions is attributable to the fall in the value of the sterling, resulting in more favourable valuations that are particularly attractive to foreign bidders. It also attributable to lower interest rates and the UK market being viewed a slow risk due to reduced ‘red tape’ and government interference.
Institutional acquirers are becoming increasingly confident in the market, as the number of deals involving these types of buyers has increased by over 21% since 2011 in the UK. Private Equity firms continued to make investments in software and data providers, helping to keep technology as the top sector for investment in 2016.
UK based trade acquirers have also shown signs of ‘loosening the purse strings’. The cash reserves that they have maintained throughout the recent economic troubles are continuing to be invested in order to facilitate growth initiatives, with many choosing a policy of acquisition rather than achieving organic growth.
For company owners considering the sale of their business, now is an opportune time to consider the value of their company and decide upon relevant exit strategies, especially as other external factors are currently favourable to sellers. This includes the current capital gains tax legislation which states that through the Entrepreneur’s Relief scheme,shareholders who meet the qualifying criteria pay substantially less tax on the sale of business assets than they have done previously. This can be as low as 10% compared to previous rates of up to 40%, representing a huge saving when owners look to maximise their return on effort.
For a straightforward market valuation of your company, please take a few minutes to fill out the valuation calculator, or contact us for further information.