Latest views on the M&A market

October 21, 2022
Business Growth

There are many reasons that 2021 was an exceptional, unusual year in the UK. Asked to name some, it’s unlikely many people would think first of the M&A market. But, after a sleepy year for the market thanks to Covid-induced lockdowns in 2020, there was something of a mini-boom in 2021.

Lots of pent-up funds and a backlog of undone deals made for a huge increase in both deal volume and value.  

At a recent Helm workshop on Maximising Capital Value, our partners finnCap Cavendish presented a picture of just how “frothy” the market got in 2021 (see chart, below).

The finnCap Cavendish presentation once again highlighted the extent to which non private equity deals dominate. This is despite the attention paid to the private equity sector by the financial media and often by the founders looking for a sale or investment.

The non-PE market, including trade sales, accounts for a much larger chunk of the UK deal activity (see below).

Regardless of where the investment or funding is coming from there is one trend that is good news for most people looking to sell all or part of their business – the price investors are prepared to pay (most often calculated as a multiple of EBITDA) is back on the rise.

After a steep jump during 2021 (due to the frothy market mentioned above) average multiples dropped off at the start of this year, but have more recently started to pick up again. The latest figure available is 10.6 x EBITDA.  

Naturally, this will depend not only on factors such as sector, but also on the dynamic between buyer and seller and the quality and condition of the business being acquired.  

For founders considering an overseas buyer – and there have been more and more such buyers in recent years as a weaker pound has made UK investments more and more attractive – there is little question which market to focus on.

The US dominates, accounting for almost as many deals as the rest of the world combined. When combined with Canada (which ranks second), North America is the source of more capital than the rest of the world.

And finally, finCapp Cavendish offered some insights into sectors they see as the hottest or most buoyant when it comes to attracting investment and getting deals done.

There remains a strong hangover from the pandemic, with home entertainment, online retail and healthcare all popular, along with logistics, takeaway food delivery services, online gambling and remote learning. Other popular sectors such as residential property management and fintech appear stronger bets for the longer term.


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