June 2024

If You Are Thinking of Selling Your Company, is 2024 a Good Bet?

There is no doubt about it, the market for selling companies is a mixed outlook. On the one hand, as the latest data shows, there has been a slight decline Q1-24 in the number of companies sold (or ‘deals’ as we call them here).

On the other hand, there is reason to be cautiously optimistic in the UK for 2024, particularly in the low and mid-cap space.

Despite a subdued global M&A landscape in 2023, the UK is expected to see an increase in deal activity in 2024. This is driven by factors such as declining inflation and a more stable interest rate environment.

The general outlook for a Labour Government indicates a stable operating environment for business (normally a strong conservative theme!) – nevertheless, the signals coming out of the City are generally positive.

Let’s look a few themes…

Private Equity

Private equity remains a significant driver of M&A activity. In the mid-market sector, private equity investment saw a decline in 2023 due to macroeconomic challenges, but the fundamentals remain strong. With available capital and normalising valuations, the outlook for 2024 appears more positive. The market expects more transactions, especially as debt markets, though scrutinised, remain supportive.

Sector-Specific Dynamics

1. Technology, Media, and Telecommunications:

Despite a drop in deal volumes in 2023, technology, media, and telecommunications (TMT) continues to be a critical sector, with anticipated consolidation and portfolio rationalisation driving activity.

2. Consumer Industry:

Private equity is expected to focus on portfolio value creation in the consumer industry, leading to more transformative deals.

3. Financial Services:

The financial services sector bucked the trend in 2023 with increased investment activity, a momentum likely to continue into 2024.

4. Renewable Energy:

The renewable energy sector is poised for significant M&A activity as the UK continues its transition towards greener energy sources. Investments in solar, wind, and other renewable energy projects are expected to increase, driven by both policy support and the global push for sustainability.

5. Industrial & Manufacturing:

The industrial & manufacturing sector is anticipated to experience growth in M&A transactions. This is driven by the need for companies to streamline operations, adopt new technologies, and expand their capabilities. There is a particular focus on sustainable and energy-efficient solutions, which are becoming increasingly important in the industrial landscape.

6. Healthcare & Life Sciences:

The ongoing need for innovation in medical technologies, pharmaceuticals, and healthcare services drives consolidation. Companies in this sector are looking to expand their research and development capabilities and market reach, making it a key area for M&A activity.

Small and Mid-Cap Companies

The smaller end of the market occupied by privately owned companies remains particularly attractive due to slightly depressed valuations. For both strategic buyers and private equity alike, current valuations offer a premium investment thesis. The average takeover premium has been increasing, and this trend is expected to persist, leading to selective re-ratings across the market. This makes small and mid-cap companies attractive targets for both private equity and strategic buyers.

Conclusion

As a small M&A boutique with a goal to guide 2 – 3 x company owners each year through to exit, we remain consistently busy. Our clients value our specialist support in what is a ‘once-in-a-lifetime’ event – and with an expected 3 x completed deals this year, we will be entering 2025 with another busy year ahead.

But in terms over overall outlook, the M&A market in the UK for low and mid-cap companies in 2024 is undoubtedly poised for growth. Economic stability, better financing conditions, and reasonable valuations are expected to drive increased deal activity, with significant roles played by private equity and strategic acquisitions across various sectors.

If you are thinking of selling your company at some point in the future, why not talk to us in confidence about your plans and aspirations?

Tags: 2024, and Telecommunications, Consumer Industry, Financial Services, Healthcare, Healthcare & Life Sciences, Industrial, Industrial & Manufacturing, Life Sciences, Media, Mid-Cap, Mid-Cap Companies, private equity, Renewable Energy, Selling Your Company, Small Companies, Technology, Thinking of Selling, TMT