Renewable energy sector ripe for M&A activity

January 30th, 2018 by Chris St Cartmail

There has been a significant shift towards renewable energy investment in recent years and the appetite for buying and selling businesses within this space is growing all the time.

A new report from KPMG entitled 'Great Expectations' looks at the healthy mergers and acquisitions market within the renewable energy industry. It questioned some 200 senior executives from a range of global financial funds and corporations to establish their attitudes towards the market. The report found that the average deal value within the renewable energy industry increased by 31 per cent in the final half of 2017, while the volume of M&A deals increased by eight per cent.

Analysts claim there are a number of factors driving the increase in M&A activity within the industry, not least being the need for countries around the world to meet their Paris Agreement targets. This high profile global effort to reduce the use of non-renewable energy and cut carbon emissions has spurred massive investment and growth – and where there's investment and growth, business buyers and sellers, as well as private equity investors, will be looking to acquire their slice of the pie.

The KPMG survey asked the executives to give their view on who the main acquirers will be within the renewable energy space over the coming year. Interestingly, half of them said financial buyers and half said corporate buyers overall. However, those surveyed thought that independent power firms, general utility firms and oil and gas firms were more likely to be purchased by corporate buyers than financial investors.

The survey looked at a number of areas in particular, including the automotive sector, where the move towards electric and hybrid vehicles has sped up significantly in recent years. It commented: “There are plenty of opportunities to be found. The renewables revolution offers technology-driven energy generation and distribution, consistently and at an increasingly reasonable price.

“Innovative technology, designed to increase and maintain security of supply and meet growing consumer demand, is being introduced with impressive speed.”

KPMG also questioned the executives about their views on the obstacles that lie in the way of investors looking to buy up their own renewable energy firm. The research came up with some interesting results. In the ASPAC region, respondents cited access to financing as a major obstacle to doing deals within the space, while EMA region respondents said the regulatory environment could stand in an investor's way.

Overall, though, planning permission was cited as the biggest difficulty when looking to do deals in the sector, with the instability of incentives and changes in technology coming in second the third.

2017: A Record Number of Global Business Acquisitions

January 9th, 2018 by Chris St Cartmail

Fact: 2017 was the biggest ever in terms of numbers of mergers and acquisitions across the globe.

Data from Thomson Reuters put the total value of international transactions at $3.5 trillion, with over 50,000 deals done.

businesses for sale

Mergermarket have also released their 2017 report which fairly closely mirrors Thomson Reuters’ data.

The difference between the two surveys is that Mergermarket looks at deals over US$5 million (about 18,400 transactions), whereas Thomson Reuters’ data looks at deals done over US$1 million.  Read the rest of this entry »

How the Autumn Budget will benefit small companies

November 24th, 2017 by Chris St Cartmail

Earlier this week the Chancellor, Phillip Hammond, unveiled the much-anticipated Autumn Budget, a document that sets out how the Conservative government will direct its spending and taxation policies going into 2018.

The country’s smaller businesses will be pleased to learn that the government have walked back plans to raise business rates, particularly those for smaller businesses.

The inflation measure used to calculate business rates will be switched from RPI to CPI as of April 2018 – two years earlier than originally planned – to save SMEs an estimated £781 million, according to business rates expert CVS. Revaluation will be changed as well after causing so much chaos earlier this year, with revaluation periods changed from five to three years.

All of these will serve to save small business money and administration headaches – which is good news for anyone hoping to buy a smaller enterprise.

So too is the news that the VAT threshold will remain at £85,000, despite whisperings that this would be lowered. This remains one of the highest thresholds in the world and goes against suggestions that reducing it to a more EU-compliant £25,000 could raise as much as £2 billion for the exchequer.

On the contrary, maintaining the current VAT threshold means the UK can remain true to its “nation of shopkeepers” ethos and promote small business.

As Mike Cherry, national chairman of the Federation of Small Businesses, says: “Dragging thousands of more small firms into the hugely complex VAT regime would have caused a significant drag on output at an already challenging time for businesses.”

More good news for SMEs came throughout the rest of the Budget: an increase in the scope of Enterprise Investment Schemes will unlock another £7 billion of growth investment for small firms, for one, and a government commitment of £2.3 billion of research and development funding for new companies.

Emma Jones, the founder of a small business support group, Enterprise Nation, describe the Autumn Budget as “solid”.

She added: “'This is what we've been saying for a while should be the role of Government when it comes to enterprise creation and support; build the right environment and conditions for businesses to prosper and thrive, and then let businesses do what they do best.”

Business rates reform leads to higher bills but greater opportunity

October 26th, 2017 by Chris St Cartmail

The government’s re-evaluation of the country’s business rates has driven up the tax bill for many of the UK’s smaller enterprises, but could provide an opportunity for those looking to buy a business.

Though at the time officials promised this year’s rates adjustment would be “revenue neutral” for the government, the move was intended to re-balance £3.6 billion worth of tax income by boosting charges in London but cutting those in small towns and rural areas.

A recent analysis by rates specialist CVS reveals that increases to the business tax will total £152 million in April 2018, however, with more than 56,000 small business facing “steep rises”.

As a property tax based primarily on rental values, it may come as no surprise that a heightened rate of inflation and spiralling commercial rent – particularly in London – have driven up rates. Increase import prices due to Brexit, too, may see consumers tightening their belts on spending.

After the government’s first revaluation in seven years, firms in London saw an average rise in business rates of 24 per cent while regional traders experienced a 5 per cent drop – which is fine, until you consider that many were expecting at least a 50 per cent reduction.

Though these increases may see costs rise for many small businesses, and those in large cities particularly, there is a great opportunity for savvy buyers to find new acquisition targets.

On one hand, with slashed margins and heightened operating pressures, there may be more distressed or cut-price companies available to buy. On the other, there are myriad opportunities for particularly experienced buyers to transform businesses that may have otherwise been abandoned.

That being said, the view from the government is that these rates are being closely monitored and should remain constrained.

Following news about the higher rates for smaller businesses, the Treasury reaffirmed that it was delivering “the biggest ever cut in business rates across the country” and had no plans to change the relief package.

Betting companies limber up for autumn of dealmaking

October 9th, 2017 by Chris St Cartmail

Some of the most globally renowned betting groups are preparing for a round of multibillion pound dealmaking in an effort to establish industry dominance.

One of the first deals is set to be a previously thwarted merger between an Isle-of-Man headquartered online group GVC Holdings and UK bookmaker Ladbrokes Coral. According to sources, the two groups have already agreed the shape of a new executive team and board, and are getting ready to make the next steps.

At the same time, other well-known companies including William Hill, Paddy Power Betfair, 888 Holdings and Jackpotjoy are making their own plans to out-strategise their betting rivals.

The majority of the new deals are expected to be carried out after the outcome of the UK regulatory review is published later this month, according to interviews with more than 15 senior industry executives who revealed the information to the Financial Times on condition of anonymity.

As yet, the unknown impact on income that any regulatory reform would have makes it impossible to assess the value of gambling companies, which is leading rivals to prepare plans that can be put into action after its release.

David Jennings, head of leisure research at Davy, the Irish wealth managers, said "After the review, it won't be the commencement of talks, it will be the continuation of them."

Gambling groups are beginning to realise that greater scale can help to stave off the competition from newer, online businesses and increased regulatory scrutiny. Newly enlarged companies would be able to operate several different brands, but save money overall by unifying these systems into a single platform and single marketing budget.

In 2015, Paddy Power and Betfair spearheaded this movement by combining to create the world's largest gambling company, with an estimated value of £7bn. The two brands are still integrating, however, which makes it unlikely that they'll be engaging in more high-value deals anytime soon.

A third of UK businesses slow to adopt modern tech

October 3rd, 2017 by Chris St Cartmail

Nearly a third of all UK businesses surveyed for a new study have admitted to being slow at adopting technological innovations.

Despite increasing advances that streamline and automate many business operations, as many as 32 per cent still use paper to store business-sensitive information, while others are still way behind when it comes to delivering multi-platform content and being active through digital marketing.

“Slow or late tech adopters risk falling behind the curve and, as a consequence, potentially damaging their competitiveness,” said Beverley Wise, UK & Ireland director at TomTom Telematics, the company who conducted the research.

“Effective long term digital strategies and the integration of technologies into core business activities can hold the key to simplified processes, helping improve operational efficiency, productivity and sustained levels of growth.”

Somewhat surprisingly, even though a large portion of the 400 UK senior manager respondents admitted to being behind when it came to the latest technology, 82 per cent agreed on the importance of using the most up to date technology when it came to their businesses.

The number one barrier to tech adoption was cost, with 36 per cent seeing it as a prohibitive factor. A further 16 per cent said they faced difficulties introducing these new systems, while 15 per cent said they didn't have the time to invest, research and implement such measures. Another 11 per cent said they faced resistance to modern technology from their workers.

Wise commented on these findings: “Companies should look beyond the short-term pain of any initial outlay – an investment in business technology that is implemented and used effectively can result in a significant and swift return on investment.”

“Clients that have adopted advanced telematics systems, for example, have demonstrated returns after just three months. Moreover, the right technology partner should be able to offer the requisite support to help minimise any business disruption and help ensure easy and timely implementation.”

UK pub sector in rude health as M&A activity climbs

September 20th, 2017 by Chris St Cartmail

Last orders are a long way off for the UK’s pub industry but, though appetite for deals in the sector has soared in recent years, some are warning that there may be more of a queue at the bar.

A number of high-profile deals have dominated headlines in recent months: last month, for example, Dutch giant Heineken completed its part-purchase of Punch Taverns, making it the third biggest pub-owning company in the UK.

Then there is the £100 million wrestle for Revolution Bars, a vodka and cocktail chain being courted by Slug and Lettuce owner Stonegate Pubs and nightclub operator Deltic. American buyers are also getting involved, such as US investment fund Proprium Capital’s £220 million to buy Admiral Taverns, which owns 1,000 pubs around the UK.

At the same time, market commentators predict that domestic buyers will continue to look for good deals in search of scale, with many expecting a tough time for the pub industry given the pressures on consumer spending.

Deltic’s chief executive, Peter Marks, says that not even that can curb the flow of pints to domestic consumers.

“There are questions about consumer spending but if you look over the 30-or-so years I have been in the industry while business has always fluctuated the pub industry has adapted and survived,” he says.

“A visit to the pub is a low ticket item and it has been pretty recession proof.”

Though worldwide beer consumption has dropped 1.8 per cent in 2016 to reach 185 billion litres worldwide, UK consumers’ appetites for fine ales have been maintained.

According to Chris Wickham, an analyst at corporate advisory Whitman Howard, many of the world’s major brewers looking at the UK pub market as a sure-fire way to secure distribution and volume.

“It’s hugely beneficial if you can tie in a brewery with pubs as brewers love to have distribution,” he says.

“With small brewers the difference between being profitable and not is a route to market so I still see the brewer/pub owner business model as a very attractive one. Fuller’s does well because it has guaranteed volume.

With more deals on the way – such as the proposed sale of bar chain Be At One to a range of suitors, including Avenue Capital, which bought 363 UK pubs in 2014 – pub deals are set to continue at a giddy rate into 2017.

Revealed: “Hot Sectors” in the acquisitions market right now

July 26th, 2017 by Chris St Cartmail

The ‘hot’ acquisition sectors are revealed in an exclusive video interview with Rob Goddard of Evolution Complete Business Sales.

The transcript of the interview follows:

What are the ‘hot sectors’ in the acquisitions market right now?

The sort of industries that are hot sectors at the moment would be anything in and around the IT and telecoms, integration side, globally.

Movement, storage of information, how that’s transmitted and through what devices.

Pharmaceutical, bio-science anything that’s niche and cutting edge gains a lot of interest on the buying and selling market.

Pharmaceutical, medical and health care are usually fairly common throughout the years. Not just those sectors where companies are supplying products and services, but companies that are selling into those sectors. They might be consultancy or software that’s selling into pharmaceuticals. It might be linguistics/translation selling into the medical market.

Those are the “hot” ones but it’s not an exclusive list at all.

Subscribe to the Business Sale Report for access to more exclusive videos and inside track access to the latest deals and business sale opportunities.

View the pervious video in our mini series – The most costly buyer mistakes revealed here.

Leaking information on M&A deals boosts deal values

June 23rd, 2017 by Chris St Cartmail

Leaked data on mergers and acquisitions (M&A) boosts the average value of deals by $21 million, new research from Intralinks suggests.

The 2017 Intralinks Annual M&A Leaks Report revealed that in 2016, almost one in 10 (8.6 per cent) of global M&A deals were leaked ahead of any public announcement of the transaction. While similar to 2015 figures, the statistic represents a significant jump from a six-year low of six per cent in 2014. These results come despite the efforts of financial regulators to stamp out deal leaks and boost fines and penalties for market abuse and insider trading.

India topped the list of the top ten hotspots worldwide for deal leaks, with 16.7 per cent of the country’s deals being publicly leaked, followed by South Korea (16.1 per cent) and Japan (12 per cent). In comparison, the countries with the lowest rate of leaks include Canada (4.3 per cent), France (4.3 per cent) and the UK (7 per cent).

The Retail, Real Estate and Consumer reported the biggest problems with leaks, with the latter seeing its rate of deal leaks jump from 7.8 per cent in 2015 to 15.5 per cent in 2016. Meanwhile, Healthcare, Energy & Power and Industrials witnessed the fewest breaches.

So why do M&A deals leak? The answer lies in the higher target takeover premiums these leaks generate, resulting in higher valuations. As the Intralinks report highlights, this pattern has held true from 2009 to 2016 – during which time the median takeover premium for leaked deals has been 47 per cent for leaked deals vs. 27 per cent for non-leaked deals.

Percentage of M&A deal leaks by region

Percentage of M&A deal leaks by region

However, it’s not all bad news for businesses. Philip Whitchelo, Vice President of Strategy and Product Marketing at Intralinks, suggests the appeal of deal leaks may be waning.

“The rate of deal leaks in markets where leaking was rampant a decade ago, such as the UK, has reduced considerably: a reflection of new regulations against market abuse and much stricter regulatory enforcement.

“Countries such as India and Hong Kong, which have comparatively high levels of deal leaks, are also making more efforts to tackle market abuse and insider trading. Overall, against the perceived benefits, those leaking deals must also weigh the risks, and those benefits appear to have reduced in 2016,” he commented.

Subscribe to the Business Sale Report for access to more exclusive videos and inside track access to the latest deals and business sale opportunities.

Most costly buyer mistakes revealed

May 9th, 2017 by Chris St Cartmail

The most costly buyer mistakes are revealed in an exclusive video interview with Rob Goddard of Evolution Complete Business Sales.

The transcript of the interview follows:

What are the most costly mistakes that a business buyer can make?

I think to buy a business that doesn’t work out.

If you look on the internet you’ll find that the failure rate of an acquisition is between 50% and 80% in this country, depending on what sector you look at, within 5 years of the acquisition taking place.

It’s a high-risk strategy – where it works, it works extremely well.

And there are all sorts of reasons why that failure rate is so high in this country.

One of the things is buyers don’t take advice from professionals that are in the sector.

Another reason is they don’t do their due diligence properly. Because most people who are selling probably won’t tell you everything about their business. It’s like selling a second-hand car. They will tell you all the nice bits, all the bits that work well. What they often won’t do is tell you the things they are not happy with, the things that don’t work well. It is the buyer-beware aspect. And there’s a high failure rate.

Another costly mistake is buying a business for ego. It’s a no-no in terms of acquisitions.

Just because you have the cash to buy something doesn’t mean you need to buy it. It’s got to fit with your strategy for your overall business. Buying the wrong business, at the wrong time and for the wrong reasons is probably the most costly mistake a buyer can make.

Just because you can doesn’t mean to say you ought to.

What can be done to prevent these mistakes from happening?

When you’ve got several million pounds to spend or more, if you’re in that lucky position of having surplus cash, just because you’ve got the cash to spend, spend it wisely and make sure it’s in keeping with what you want to achieve with your main business – otherwise it could be a very costly distraction.

We try and find out: why do they want to buy? Why do they not just set up in competition with existing players in the industry? We want to tease out their motivations for acquisition. Increasing turnover shouldn’t be one of them – it’s the old adage of turnover is vanity, profit is sanity. If you make the wrong acquisition your bottom line could go through the floor. Don’t buy the wrong thing for the wrong reason.

Subscribe to the Business Sale Report for access to more exclusive videos and inside track access to the latest deals and business sale opportunities.

View the first in our video mini series – The most common hold ups in a business acquisition here.