UK firms set sights on M&A spree

The overwhelming majority of FTSE 250 firm administrators wish to perform mergers and acquisitions this 12 months as they emerge from the worst of the pandemic, based on a survey of UK companies and institutional traders by dealer Numis.

The examine exhibits rising boardroom confidence amongst UK firms, a lot of which have sturdy monetary positions regardless of the 2 years of upheaval brought on by Covid-19.

Numis discovered that 86 per cent of FTSE 250 firm administrators anticipated to undertake some type of M&A in 2022 and that UK shareholders can be supportive. The survey confirmed that three-quarters of traders anticipated excessive M&A volumes.

Stuart Ord, head of M&A at Numis, mentioned that final 12 months had been very sturdy for dealmaking. He mentioned firms and institutional traders had been assured that this is able to proceed in 2022, “because the pent-up urge for food for dealmaking throughout the pandemic continues to unfold”.

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Ord mentioned UK company consumers had taken a again seat final 12 months in contrast with non-public fairness acquisitions however had been now extra keen to do offers both to strengthen operations or get rid of non-core models.

Amongst causes given for the rise in M&A exercise, greater than half mentioned it was to bolster a “market-leading place”, whereas a 3rd described it as both serving to to take care of business change or to remain forward of structural sector developments.

The Numis survey was carried out on the finish of January earlier than the struggle with Ukraine, which has triggered turmoil on markets, however Ord mentioned there have been nonetheless firms placing offers, such because the £1bn takeover of Clipper Logistics by US rival GXO, the acquisition of Engine Group by Subsequent 15 and the provide for McKay Securities by Workspace prior to now few weeks.

The vast majority of institutional traders informed Numis they anticipated valuations to rise additional this 12 months, though a fifth mentioned Covid-19 had made valuation negotiations harder. Numis mentioned this was due to uncertainty in regards to the long-term results of the pandemic. 4-fifths of institutional traders mentioned UK shares would outperform in 2022.

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Non-public fairness teams are additionally anticipated to be among the many most outstanding consumers of UK companies once more this 12 months as they search to make use of the huge funds raised from traders over the previous couple of years.

Of the 200 institutional traders surveyed, greater than half anticipated competitors for belongings from non-public fairness to rise in 2022. Executives informed Numis that personal fairness can be attracted by valuations in some companies that had been nonetheless seen as low, in addition to beneficial alternate charges and entry to low cost financing.

Institutional traders mentioned the monetary sector would in all probability be most energetic for M&A, additional proof of consolidation pressures throughout the business.

“There appears to be an rising strategic crucial and confidence within the boardrooms of UK plc with respect to pursuing an M&A agenda,” Ord mentioned, “whether or not that be to benefit from market strengths or as a defensive necessity to adapt to new realities brought on by expertise, Brexit and the pandemic”.

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Most non-public fairness companies have analysed focused sectors, he mentioned, and so had been prepared to maneuver swiftly.

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