Insights 13.11.19 Authors: Philip Bird, Pablo Jorge

Corporate Finance update – November 2019

Insights 13.11.2019 Authors: Philip Bird, Pablo Jorge
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Smaller company mergers & acquisitions (“M&A”) activity remains robust despite Brexit uncertainty

Recent data suggests that smaller company (defined as transactions in the £1-10m value range) corporate M&A activity in the UK, including late stage venture capital and private equity investment, remains strong despite Brexit and political uncertainty.

Period: 1 January 2019 -30 September 2019

Volume of deals – 407

Total value- £1.84bn

Median EV*/EBITDA for disclosed transactions = 6.53x

Period: 1 January 2018 – 30 September 2018

Volume of deals: 489

Total value: £2.23bn

Median EV*/EBITDA for disclosed transactions = 5.44x

*EV = Enterprise Value

What are we to read from these statistics?

The number of transactions has fallen by 17% between 2018 and 2019, and the total value of these transactions has also fallen by 18%. However, deal multiples have increased by 20% reaching a median Enterprise Value (“EV”)/EBITDA of 6.53x for the first 9 months in 2019.

We believe that the volume and value of transactions up to £10m will remain strong and underpinned by record levels of liquidity, or dry powder from both corporate and institutional investors in SMEs in the UK, estimated to be around £35.83bn at the end of 3Q 2019 vs £27.55bn at the end of 3Q 2018.

This augurs well for entrepreneurs and business owners who may be considering exiting from their business in the short term. Despite headwinds, appetite for acquiring and investing in entrepreneurial businesses, across all sectors, remains extremely strong and supplied by higher valuations.

What next?

If you would like to discuss M&A activity in further detail, or would like to find out how we can help your business, please contact a member of our Corporate Finance team.

(Source: Pitchbook data)