10 June 2023

New data suggests UK SME M&A dealflow could vastly increase in 2023

The UK small and medium-sized enterprise (SME) mergers and acquisitions (M&A) market has witnessed notable activity due to the large number of baby boomer-owned companies seeking to exit in recent years. However, according to a recent survey published by wealth management firm, Evelyn Partners on 7th June 2023, one in four UK business owners have hastened their exit strategies, driven by the upcoming General Election. 

The survey conducted by Evelyn Partners reveals that the majority of UK businesses with a turnover of £5 million or more are actively pursuing exit strategies. 65% of owners are looking to sell their enterprises, with 40% planning to exit within the next year. Nearly a quarter (23%) of business owners have expedited their plans to sell or wind down their businesses in the past 12 months.

The primary motivation behind these accelerated exit plans is the uncertain political landscape leading up to the General Election. With the Labour Party currently leading in the polls, concerns over potential changes in the UK government and subsequent alterations to the tax regime have become prominent factors influencing business owners’ decisions. According to the survey, 25% of respondents cited these concerns as their primary reason for expediting their exit strategies.

This trend in the UK SME market creates various scenarios and opportunities for investors, trade buyers and M&A advisors. There is likely to be an increase in available businesses for acquisition, resulting in a larger pool of opportunities for potential buyers.

For M&A advisors, this situation presents a unique opportunity to leverage the current mindset of business owners in the UK. By offering their expertise and guidance, advisors can assist owners in finding suitable trade and potentially professional investors who can continue the success of their enterprises.

The responsibility of M&A advisors extends to navigating the complexities of exit strategies for business owners in a ever shortening time frame. They will play a crucial role in providing comprehensive advice on valuation, deal structuring, and negotiation to secure favorable outcomes. Furthermore, advisors must utilize their networks to match sellers with potential buyers, considering the variety of exit options available to vendors in today’s market including an increase in SME and lower mid-market private equity firms with plenty of dry powder to deploy.

The convergence of baby boomer-owned businesses already seeking exits and the uncertainty surrounding the upcoming General Election will likely propel the UK SME M&A market. At Ascent our clients are as active as ever, with many live and upcoming sell-side processes for both SME and mid-market companies seeking trade exits, growth capital for international expansion, and a private equity partner to support buy and build strategies. Let’s see how this unfolds in 2023 and into 2024.

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