Cash rich private UK companies look to snap up bargains, with
40% planning to grow through aquisition
Despite current financial market turbulence, 40% of private
companies in the UK are planning to grow through acquisition in the
next three years, with 26% of those businesses anticipating a cross
border deal, according to the Grant Thornton International Business
Report.
The survey of 600 owners and managers of privately held
businesses in the UK shows that while the mega deals may be drying
up, the mid-market is still fuelling M&A activity, with
ambitious and well-funded companies now set to pick up
bargains.
Mike Hughes, Grant Thornton Corporate Finance Partner, said the
focus on acquisitions by mid-market companies reflected the
increasing ambitions of this sector of the market.
"There is an increasing number of private companies with access
to funding who see the current climate as providing huge
opportunities for expansion, with business valuations dropping and
some business owners looking for quick exits rather than trading
through a more difficult economic period. In particular, private
equity backed businesses seeking to grow aggressively are often
highly focused on bolt on or buy and build deals to supplement
organic growth."
"While these mid-market businesses may not be conducting
headline grabbing deals that catch the public's attention, they are
becoming increasingly more confident and successful in transacting
internationally. The growing visibility of suitable cross border
opportunities and the increasing uniformity of the transaction
process between countries have helped to boost this
significantly."
The research was part of a wider study of 7,800 private company
owners and managers from 34 countries, which found the UK remained
well ahead of continental Europe in its focus on M&A.
In comparison to the 40% of UK companies planning M&A
activity, just 27% of Italian companies, 26% of German companies
and 25% of Spanish firms plan to acquire new businesses over the
coming three years. France showed more ambition, with 36% looking
to acquire, while only Dutch businesses were more acquisitive than
the UK within Europe, with 44% of businesses planning M&A
activity.
Conversely, BRIC economies in particular revealed aggressive
acquisition strategies. More than two thirds (67%) of Mainland
China businesses were planning acquisitions, while Brazilian
companies were also set to be very acquisitive, with 64% planning
to buy for growth. Indian companies were planning acquisition in
46% of cases.
"In particular, fast growing economies such as mainland China
and India see international M&A as a key tool in progressing up
the value chain through the acquisition of brands and distribution
channels in North America and Europe," said Hughes.
Pankaj Karna, M&A partner from the Indian member firm of
Grant Thornton International believes this reflects the current
positive attitude amongst business owners in the emerging economies
coupled with continue to make the UK a target for international
acquisitions.
"Three factors are driving overseas acquisitions by Indian
privately held companies. Firstly they want to be globally
competitive and close to their customers, secondly they want to
acquire technology and thirdly relative valuations look favourable.
Fundraising is easier now than it was 5 or 10 years ago. Privately
held businesses in India are particularly positive now