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20 May, 2022 - 20:23

Myriad of options for business owners amid return to pre-pandemic dealflow

Whether you are buying or selling a business, or fundraising for growth, the sheer number of options available to business owners has never been greater – or so commonly misunderstood, writes John Gethen, a Corporate Finance Director at BDO in East Anglia.

A seemingly endless number of main or alternative funders, trade buyers, conglomerates and private equity houses exist, all of whom may provide a potential solution depending on the circumstances.

As a business owner, it is important to work with advisers who have a deep understanding not only of these funding options but, more importantly, of your business and personal objectives, your industry and market. 

At BDO our Corporate Finance teams adopt a sector-led approach which means we are able to provide business owners with the genuine expertise you deserve when making potentially life changing decisions on what direction to take.

Recent limited company deal activity illustrates that confidence and therefore choice remains high for business owners in the region. According to our latest Private Company Price Index (PCPI) report, in Q1 of this year there were 573 private company deals in total, which was a return to pre-pandemic levels.

Although the number of deals was slightly down from that seen in Q4 of FY21, it is not surprising to see a simmering down in volumes following the catch-up activity that took place last year. 

So far, indications are that the ‘new normal’ is looking very much like the ‘old normal’, despite considerable uncertainties across the economic and geo-political spectrum. 

It is notable, for example, that March 2022 saw activity levels step up despite the invasion of Ukraine. UK business leaders have proven highly resilient and have cash to spend, meaning the outlook for M & A remains strong.

What makes this M & A activity all the more remarkable is the backdrop against which it’s set. Businesses from a regional, national and global perspective are facing extraordinary pressures at the moment, whether that’s rising inflation and a squeeze on household income, the lingering effects of a pandemic or the geopolitical uncertainty caused by Russia’s invasion of Ukraine. Despite this, it appears to be having little to no effect on buyer demand. 

In a globalised world, everything is connected and so invariably, there’s often an indirect link between businesses in the region and the geopolitical factors at play such as the war in Ukraine.

While it’s not yet manifesting itself in terms of the number of deals being done, we are beginning to see certain pressures having a profound effect on the due diligence process. 

For example, previously accepted assumptions around inflation levels, energy and fuel costs, wage inflation and supply chain stability, are now increasingly coming under scrutiny from prospective purchasers along with ESG (Environmental, Social & Governance) and technological considerations.  

This is resulting in an increased desire for diligence, not just in the usual areas of financial, tax and legal, but also increasingly in the areas of operations, technology and commercial due diligence.

As a region boasting a variety of sectors, it’s little wonder that investment is being made across the board. With activity remaining high in sectors such as healthcare and life sciences, and with the Cambridge Cluster continuing to garner attention from acquisitive companies and investors alike, it’s hard to imagine appetite waning significantly as we enter the second half of 2022.

The reality is that deals are flowing. What’s more, the corporate finance community is pumping considerable resources into the region as they look to capitalise on this rich vein of form. 

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