Renewed Optimism Paves Way For Increase In M&A

According to a recent survey of over 1,500 senior executives, 93 per cent of UK firms now view the global economy as stable or improving, leading to three-quarters of them feeling that M&A volumes will increase over the coming year.

However, actual deal activity is lagging behind the optimism, leading to a ‘confidence paradox’, with planned activity contradicting expectations, which could mean that there are some great deals to be had by bold movers.

There has been a modest improvement in the number of UK companies planning acquisitions, which is largely driven by an increasing number, and higher quality, of acquisition opportunities.

Thirty-seven percent of the firms surveyed said there are quality acquisition opportunities available compared with 33 per cent six months ago, while more than half of them feel more confident about the number of opportunities available, versus only 40 per cent six months ago.

The study also showed that the top five destinations where UK businesses are most likely to invest are India, South Africa, United Arab Emirates, Germany and France. In contrast China, India, Brazil, US and Canada feature in the top five global investment destinations.

However, the fact that UK firms are reluctant to invest in more of the BRIC nations shows that there is a still a degree of nervousness around straying from familiar paths.

Interestingly, the number of firms planning to sell in the next 12 months is down to 12 per cent from 38 per cent in April last year. This appears to be mainly because of the inability to realise price/value expectations, while another reason given was because it would cause disruption to the core business.

According to the survey, the sectors most likely to see acquisitions are automotive, technology and consumer products and deal sizes are likely to remain on the smaller side, despite record amounts of available cash.

As an accountant, Philippe Herszaft specialises in offering advice, support and guidance in regard to business acquisitions and mergers.