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What now for British M&A?

June 24th, 2016 by Chris St Cartmail

The Great British public has spoken and voted for the country to exit the EU. Cameron has resigned and the government is trying to put together an economic and legal plan for the road ahead.

Business owners will need to stay calm and concentrate on trading as usual. The uncertainty of markets and currencies may create difficult trading conditions for larger businesses who have suffered share price falls.

Economically it will be important for Britain to maintain inward investment and much of this, at least in the short to medium term, depends on the deal that the UK now negotiates with the EU. Hopefully the country will successfully negotiate continued access to the 500 million people across the EU and European Free Trade Association. How it is going to do that without allowing for the movement of Europeans across its border is going to be interesting. Despite no other country having managed to this so far, Britain’s trade involvement with the continent is substantial and mutually beneficial, so we should see a deal being struck with favourable terms after some serious negotiation.

In the event of Britain not succeeding in its continued membership of EFTA, all is not lost. Currently around two thirds of UK exports are destined for non-EU countries and it is entirely possible that over time the new freedom to negotiate free trade treaties will increase substantially to mitigate any EU shortfall. Of course there are already treaties in place between some of these countries and the EU which will need to be renegotiated by Britain.

Legally, the retreat from Europe shouldn't’t affect private M&A deals where the required documentation is reliant on English law and the exclusive jurisdiction of the English courts. However current and recent M&A contracts ought to be re-examined from a legal perspective in the light of Brexit. That’s because Britain’s withdrawal could be deemed a ‘material adverse change’ and therefore potentially enable a contractual clause to be invoked.

M&A deal flow slowed slightly in the lead-up to the referendum, though only from round mid-May. It ought to be noted that foreign (non-EU) investment into the UK has increased substantially this year over last year. This will pick up again now the referendum is over. The lower pound will certainly make UK company assets more attractive.

British business is generally agile and used to a fast-moving, competitive trading environment and an uncertain political and economic landscape. The legal and regulatory environment is robust and corporate tax rates are low. British creativity and ingenuity continues unabated.

What would Brexit mean for the business for sale marketplace?

June 21st, 2016 by Chris St Cartmail
The European Union: are we in or out? brexit

Britain will make its choice on the 23rd of June. The vote has already become personal, the heated debate is inescapable and the media scaremongering has seen each side giving as good as they’re getting with hyperbole and accusations.

But when it comes to the future of the British economy, is it possible to put emotion aside and make a clear decision as to what’s best for business? And for those in the M&A industry, is it really possible to make a clear case in favour of either side at this point?

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What are you waiting for? It’s a great time to grow by buying another business.

May 30th, 2016 by Chris St Cartmail

We are seeing more private businesses appear on the market again after a short lull. One of the reasons for this is that in the lead-up to the recent Budget there were rumours about that the government may have been about to kick the very useful Entrepreneurs’ Relief into touch. Heaven forbid!

This prompted more than a few concerned business owners to cash their chips before D-Day.

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Solvent business liquidations soar

May 20th, 2016 by Chris St Cartmail

March 2016 saw a record number of UK companies file for voluntary liquidation. There were 2663 solvent companies wound up – over three times the usual monthly rate which has averaged at 768 for the twelve months prior. The last highest month recorded was April 2015 when 992 companies filed.

What could this be attributed to?
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Residential care activities insolvencies up 23 per cent

May 5th, 2016 by Chris St Cartmail

Some interesting analysis on the residential care home market has been carried out by FRP Advisory.

Running against a general cross-industry trend of declining corporate insolvencies, the care home sector has been going through a very rough patch with insolvencies up 23% year on year. We are looking at a staggering 24-fold rise since 2010.

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New Business Sale Report Google Chrome Extension released

April 14th, 2016 by Chris St Cartmail

For those of you using the Google Chrome browser on a PC or Mac, we’ve created a very simple way to let you know about UK businesses for sale and divestment news before anyone else.

Our new Google Chrome Extension installs in seconds into your Toolbar, to let you know at a glance whether there are any new businesses for sale in the industry sector(s) you are interested in.

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Tata Steel puts UK business up for sale

March 30th, 2016 by Chris St Cartmail

Tata Steel has put the UK’s largest steelmaking business up for sale. The operation in Port Talbot, one of the few steelmakers left in the country, has been making heavy losses for some time.
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Retail sector warned of potential for ‘perfect storm’

December 27th, 2015 by Chris St Cartmail

For most, Christmas Day brings with it joy and cheer but for some retailers, the 25th of December will have bought with it a sense of foreboding as it heralded quarterly rent day.

The past few years have seen a string of retail insolvencies either just before or just after Christmas as businesses have struggled to adjust to the changing market and consumers' growing reliance on online shopping. Zavvi, Jessops and Woolworths are among those to have hit the wall in recent years under the seasonal pressure.

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Manufacturing sector shows tentative improvements

August 3rd, 2015 by Chris St Cartmail

The manufacturing sector in the UK has been somewhat subdued of late but there is still activity to be found and certain areas around the country are looking particularly strong.

Released today (3 August 2015), the latest Markit/CIPS UK Manufacturing PMI recorded 51.9. While this is still close to the growth cut-off figure of 50, it is an improvement on June's index, which recorded just 51.4 – a 26-month low.

The industry welcomed the increase, but it still remains below the average for the current sequence of growth, which began back in 2013.

Rob Dobson, senior economist with Markit, commented: “Although an uptick in the headline PMI breaks the decelerating trend in UK manufacturing, growth remains near-stagnant and suggests that the sector is continuing to act as a drag on the economy.”

Regional Differences
The PMI comes after the last week's (30 July) publication of the EEF Regional Manufacturing Outlook which found that Wales and the East Midlands were both showing particularly high levels of activity with GVA in these regions both registering above 15 per cent.

For Wales, transport, metals and machinery were the top three sectors influencing this strong performance. Transport also performed well in the East Midlands ranking as the second strongest sector, with food and drink in first place and rubber and plastics in third.

On the other end of the scale was the South East, which recorded a GVA of less than ten per cent. Overall, output was weak in the region, but electronics and pharmaceuticals did manage stronger performance than other areas.

Domestic Market Holding up the Market
Back to the PMI data and it's clear that it's the domestic market that is keeping things moving as the sterling-euro exchange rate continues to sap export demand. Mr Dobson added: “The struggling manufacturing sector, and the impact of the strong pound on export performance, will be a worry for the Bank of England.

“However, with the goods-producing sector accounting for only one-tenth of the economy, these woes may take second place to the health of the far larger services sector in determining the timing of the first interest rate hike, suggesting firms will have to adjust to the pound trading at its current highs.”

What will all this activity – or lack of activity – do to the number of manufacturing businesses for sale?

Clearly the slow performance from manufacturing is having an impact on how buyers feel about the arena. Analysis from law firm Irwin Mitchell, using data from Experian, found that M&A activity among Yorkshire-based manufacturing companies dropped by 44 per cent in the second quarter of 2015 in comparison to the figure for the first three months.

Yorkshire wasn't top of EEF's regional analysis, but it wasn't bottom either, showing between 14 and 15 per cent GVA.

Andrea Cropley, partner and head of corporate with the law firm in the north of England, said she expects that activity will remain subdued until “the sector as a whole shows signs of consistent improvement”.

Our team at the Business Sale Report posted 21 manufacturing businesses for sale in July. It certainly wasn't our most popular sector for listings or for potential buyers looking to buy; perhaps wisely many people are holding off and waiting for improvements before investing in the creeping industry.

For some more experienced buyers, it might be the time to find bargains as people look to offload businesses or divisions in the underperforming industry. But if such a leap of faith is to be taken then due diligence will be more important than ever in assessing potential acquisitions and keeping a close eye on the market will no doubt the key.

Mixed fortunes for construction sector

July 24th, 2015 by Chris St Cartmail

The construction sector has had a mixed bag of fortunes this year. In June, the revised GDP figures from the Office for National Statistics (ONS) revealed that Britain's economic output had grown more than predicted and put the unexpected growth down to construction's strong performance.

The figures confirmed that GDP rose by 0.4 per cent in the first three months of the year, rather than the 0.3 per cent that had been predicted. New methods used to measure construction output were said to have played an important role with Joe Grice, chief economist at the ONS, noting that the upward revision is “down largely to the recently announced new methods to measure construction output”, which have a greater reliance on real world hard data.

Construction starts to falter
The sector might have started the year on a high, but when the ONS looked back on the second quarter and honed in on April and May it found that output dropped by 1.3 per cent between the two months, when economists had been expecting a 0.2 per cent rebound. Annual output for the sector remained up at 1.3 per cent, but there is further concern that when the figures for the second quarter as a whole come in, they will show a contraction for the three-month period.

Howard Archer, chief European and UK economist at IHS Global Insight, told the Financial Times: “There is now a very real risk that construction output contracted in the second quarter and was a drag on . . . growth.

“Indeed, construction output would have needed to grow 2.3 per cent month on month in June to have avoided contraction in the second quarter.”

Optimism remains high
Despite the dubious results from the ONS data for the second quarter, positivity in the construction sector remains high. Markit's Purchasing Managers' Index for June rose to a healthy 58.9 in June, up from 55.9 in May – any reading above 50 indicates growth.

Tim Moore, senior economist with Markit, commented: “UK construction companies experienced a growth rebound and surge in business confidence at the end of the second quarter.

“Survey respondents cited robust inflows of new work in June, adding to already strong order books across the sector.”

The data at the moment presents a mixed picture when it comes to construction's immediate future. It looks like optimism is being fuelled at least in part by the healthy future pipelines many businesses are eyeing up – such as the ten new schemes and 800 new homes in Harbur Construction's £68 million project pipeline.

Individuals and businesses looking to invest in the sector will need to weigh up the downward trend seen in the second quarter data, with the positive start to the year and the optimistic outlook of many involved the sector itself. Getting this right and finding the right niche could provide some excellent returns, but it will need close market monitoring to increase the chances of success.

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