The mergers and acquisitions being carried out give indications about the economy which other key indicators don’t. Who sells, who buys and what is on the market inform M&A consultants and companies about the strong sectors and the confidence of vendors and purchasers.
Recent activity has led to the conclusion that two unlikely sectors are benefitting from our current economic uncertainty, the asset management and building products and services sectors.
This may seem odd; shouldn’t the M&A activity reduce during the post Article 50, Brexit negotiations era? No, it’s expected that in the next 1-3 years that these two sectors will enjoy the most M&A activity that they’ve known in years.
Life is full of surprises!
Sector 1: Asset management
Asset management deals fell a little in 2016 on the year before; 145 in 2015, 133 in 2016. The trend so far in 2017 is upward so more asset management deals are taking place. PriceWaterhouseCoopers figures showed that 41 new deals were announced in the first quarter of 2017. One of these was a £2.5 billion deal between Fortress Investment Group and Softbank.
Why asset management?
The investment landscape is changing and with it the asset management deals increase. Asset managers are seeking new ways to maximise customer profits whilst countering the effects of a slower organic growth, passive investing, an ageing client base and lessening returns on standard investments.
Profitable deals are an attractive and viable solution.
Sector 2: Building products and services
This sector saw the number of M&A deals rise to record levels in 2016 and these were of significantly increased values than in previous years. There’s no sign of a reverse in the trend.
BDO, a leading accountancy firm, has collated data which has confirmed the above and that 22% of the building products and services M&A deals were private equity investments.
Companies in the sector are popular options in this private equity investors influx.
Why is this surprising?
Building products and services lie within the construction area. In times of economic uncertainty this sector normally shows a decline in M&A’s and confidence, but not on this occasion.
The sector is working against tradition and this is powerful. It illustrates to merger and acquisitions industry experts that the economy may be stronger than other economic indicators and reports have asserted.
Whilst tempering enthusiasm, it is hard not to envisage a 2017 into 2018 rise in M&A activity and values which would seem at first glance rather out of place in the current unstable economic environment.
If you have been approached about selling your business, want to learn its value or intend to make a purchase but need a true picture of a firm’s worth, speak to a professional mergers and acquisitions consultant. One of the most reputable figures, with thirty plus years of M&A experience, is Tim Luscombe. He’s is a business owner and works with Thames Valley Business Advisors and SME’s delivering his knowledge prior to, during and post acquisitions.