M&A deal value at decade high
Domestic M&A value hit a ten-year high in 2018 despite economic uncertainty, according to the latest data from the Office for National Statistics.
Acquisitions of UK companies by other UK firms rose from £18.8bn in 2017 to £26.5bn in 2018, the highest value since the boom of 2008. The value of takeovers of UK companies by overseas firms last year was £71.1bn, compared with £35.2bn 2017.
Stuart Bates, Commercial Director of Praetura Commercial Finance comments: “From our perspective as a specialist independent asset based lender, M&A deal flow also appears to be very robust in the first quarter of 2019. There are a number of key drivers behind this which could serve to counter the impact of economic uncertainty. For example, we have seen a renewed appetite from UK mid-market businesses pursuing buy and build strategies with a view to expanding their market reach and obtaining scarce technology and talent. In addition, corporate divestitures of non-core businesses in industrial sectors appear to be on the increase, which has prompted a growing pipeline of MBO transactions.
“The widespread adoption of asset based lending by private equity sponsors cannot be underestimated. These facilities, based on a combination of asset values and potentially the addition of a cash flow component, provide the opportunity to create headroom in excess of the initial purchase consideration. This, in turn, provides an increased level of working capital that will encourage and facilitate portfolio company growth post-acquisition.”