M&A Market Drivers

The M&A market, a bit like life, is affected by many factors – some more than others.  This is a note of the prime factors affecting the market currently.

At present, the market is certainly not at rock bottom, but neither is it at its pre-crash peak.

There is a big distinction between M&A market volume and value.  Volumes (numbers of deals regardless of size) are certainly not where they have been, values; skewed by mega deals are closer, if not at times surpassing past glories.

For our clients, mostly in the middle market, volumes are healthy with a positive outlook:

Private Equity

Investors are sitting on a huge pile of uninvested cash driving demand for M&A activity.  Our own measure is by how many PE firms contact us for a meeting.  In the initial contact, it is to see where we cross over and where we can help each other.  In reality, it is to see if we are willing to share any information on our clients that they might like the look of!

The Private Equity contact index is very high at present!

High demand and arguably reduced numbers of good quality targets both drive company valuations up. (Note – a lack of good quality targets may mean a lack of targets meeting the quality of earnings/growth potential/entry price requirements of investors rather than the actual number of good quality targets).


Funding is often used for mergers and acquisitions.  Excluding Private Equity, as it is covered above, for the middle market, we define this as debt for this article.  Again, in the dark days of the financial crash, debt from the high street banks was difficult to come by.  Admittedly, this has eased, but not sufficiently in the eyes of the market (and government); Challenger banks; the British Business Bank; P2P; Crowdfunding; asset funders and alternative funders have been born.  Evolved and grown into a credible alternative to the High Street banks (and fairly easy to deal with).  This may be because they are staffed by many ex-deal doers that fell victim to the cost-cutting of the credit crunch.

Foreign Exchange

British firms are selling their goods for less overseas due to Sterling’s relative weakness.  The flip side is more expensive imports. Both have an impact on the trading performance that inevitably affects valuation – particularly in negotiation.

The effect on M&A is that UK targets are ‘that much cheaper’ for overseas buyers, helping stimulate M&A activity.  Whatever happens with the elephant in the room (see below) the UK is a large economy, sustained by a large population with a world-renowned legal and financial system, which means that deals will always happen.


Regardless of one’s persuasion on the topic, it is increasingly likely that it is going to happen.  The issue, of course, surrounds the fears of how ‘it’ is going to happen and what ‘it’ actually looks like. The effect is to knock the confidence of both buyers and sellers.  Buyers fear the valuation they will achieve and the resulting damage to their business if a deal doesn’t happen and Sellers fear that the world is going to fall off a cliff the moment they sign on the dotted line.

Weighing against this are shareholders that are considering an exit will only get older as they wait to see the effect of Brexit and for some, that wait will be too long.  An alternative to an immediate sale is what funders and investors term a ‘cash-out’, allowing shareholders to realise some wealth tied up in the business now in return for debt or equity in the business – of course, tax efficient extraction is important.

The time is always right to think about succession or exit plans – whether shareholders do anything about it right away, of course, is situation specific.

At Translink CF, we can assist buyers and seller with their thought making process utilising our experience of global and UK markets. Our global network of buyers, sellers and specialised funders and investors will assist the decision-making process.  Please call us today to discuss how we can help you achieve your strategy.

Contact us by calling 0116 344 0443 or email enquiries@translinkcf.co.uk