M&A OUTLOOK FOR 2021

2021

UK M&A is beginning to return to the UK market. Many trade and private equity firms have begun to focus their acquisition strategies on businesses that have remained resilient throughout 2020 or those that could profit from strategic realignment.

Looking Back

The ONS (Office for National Statistics stated that, in the three months to the end of September 2020, the value of UK business acquisitions rose £4.4bn. This an increase from just £400m in the April to June quarter and £3.2bn from January to March 2020.

Similarly, the value in acquisitions of a UK business from abroad increased to £2.9bn, up from £2.1bn during the previous quarter – down on the £5.1bn seen from January to March.

The number of outbound acquisitions by UK companies rose from 22 in the April to June quarter to 42 in the July to September quarter.

Generally, the ONS stated that domestic and cross-border M&A involving UK companies in the three months to the end of September 2020, saw 273 completed transactions, which showed an increase of 176 in the three months to the end of June, but down from 435 in the same three months of 2019.

The report can be found here

Looking Ahead

The sectors that showed deal-making restraint during the COVID-19 pandemic will drive the next wave of activity, according to the research. For example, the consumer sector has seen an increase in M&A involving assets that struggled through the COVID-19 pandemic, led by more financially resilient competitors, while acquisitions driven by innovative companies with a strong link to their customer base have also emerged.

Private equity firms who have been active in 2020 will be even more so as businesses and sectors shift during the anticipated recovery stage in 2021. Private capital is well-positioned to benefit from the value creation anticipated for 2021. The growing presence of special purpose acquisition companies (SPACS) in the market could bring other forms of capital to the table this year also.

In Europe and the US, Brexit and the impact of any new policies as a result of the US election will play a key role in corporate strategy and capital provision. With M&A values in the UK up 40% in 2020, and with 79% of US companies signalling that they are likely to accelerate M&A strategies, alliances and joint ventures if corporate tax rates increase following the presidential election, foundations for a strong 2021 M&A are in sight.

There is a general sense of renewed optimism for 2021 as the increased availability of a vaccine promises a gradual return to normality. However, Brexit, potential tax policy changes in response to unprecedented government spending and the timing of easing of restrictions will continue to loom on UK business. Uncertainty is set to continue and so, businesses will need to remain nimble and keep a tight control on costs.

Venture Corporate Finance is a middle-market M&A advisory firm for clients planning to sell their businesses, raise capital, restructure, or grow with acquisitions. We provide independent advice and bespoke transaction solutions to meet their specific objectives.

For more information on corporate finance and M&A services, contact Venture Corporate Finance.