Brexit, global political uncertainty, turbulent markets and the endless questions surrounding the future of trade relationships across the globe have dominated our media channels for longer than anyone would have wished for. It would be forgivable, therefore, to assume that the market environment has only suffered at the hands of these sources of doubt. Companies themselves have continued to communicate such concerns to the market: the number of times “Brexit” has been mentioned in company announcements since the referendum has only continued to increase, as has “uncertainty”. Thankfully, this is not ubiquitously the case.
Whilst IPO markets have seen a lighter level of activity during 2019, for the UK M&A market, the impact of such aforementioned events seems to be less profound than often appears to be communicated.
UK public-to-private M&A across small to mid-caps has remained an active and thriving space. Ample capital has been available for acquisitions as investors have supported accretive and value-added deals. It is encouraging to note that the total value of completed UK deals sub £1bn has seen a strong 42% uptick in 2019 year-to-date, compared to the entirety of 2018. M&A volumes amongst this bucket of smaller scale companies, both on AIM and Main Market, is due to surpass that of the previous two years when considering solely completed deals; when taking into account deals which have been announced but not yet completed, 2019 is on track to exceed the previous 4 years.
A weaker pound has of course made UK assets significantly more attractive to foreign buyers: this was a notable reason for the stated interest and driver for the acquisition of Greene King by CK Asset Holdings during the summer. This phenomena has also continued to drive the increasing number of US private equity-backed public-to-private deals.
N+1 Singer has seen a number of its clients actively involved in acquisitions, advising on c. £450m worth of deals for our clients during the year. We have also found a very receptive secondary market for our clients who wished to tap into the capital markets in order to finance their acquisition strategies: N+1 Singer has raised over £600m to this regard in 2019.
We have also seen a continued increase in the percentage of acquisitions executed via a scheme of arrangement rather than a contractual offer. Offerors use schemes of arrangement as the structure of choice for implementing takeover offers, being used in 89% of all deals so far in 2019, according the London Stock Exchange. Schemes of arrangement are popular amongst buyers often due to the certainty of obtaining full control: if approved by the necessary majority it will be binding on all of a target’s shareholders, giving the buyer total control at an sooner compared to an offer.
Businesses continue to operate and execute. Whilst the struggles of closing a Brexit deal or Sino-American trade deal are on-going, it appears that such uncertainty has not yet been a deal breaker for UK listed companies.
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