In light of this, what is the world of M&A likely to look like going forward? There were over 500 transactions reported involving UK target companies in the first quarter of this year with this trend carried forward into the second quarter of the year and would appear to be carrying on unabated. Although a number of these transactions related to large global companies, SME’s have increasingly been targets of takeover activity.
Clearly in many of these cases, outside finance is required to accomplish the transaction, so where does this come from? In many cases it was supplied by specialist debt providers as well as the conventional sources such as private equity. These specialist providers have become more prominent in the UK over the last few years and are frequently turned to by borrowers rather than to banks.
However, what is noticeable is that (not surprisingly) it is the stronger acquirers which find it easier to access such finance, which in turn means that stronger borrowers often acquire stronger targets which have come through the recent trials and tribulations in good shape. The weaker companies and those which have struggled during 2020 and 2021 are often unable to access finance or, should their shareholders wish to sell, obtain what they might consider as fair value as opportunistic acquirers will look to buy such companies as cheaply as possible.
The next step
Our corporate finance and taxation teams are experienced in advising on mergers and acquisitions involving a range of companies (both strong and those which are struggling). Please contact Robert Kidson or your usual UHY adviser should you wish to discuss this further.