In the last two years merger and acquisition (M&A) activity returned in full force, with 2015 and 2016 becoming two of the three busiest years in global M&A history, along with the pre-recession boom seen in 2007.
There are a number of factors contributing to this, ranging from economic confidence through to pressure from shareholders who want to see growth. In addition, continued low interest rates combined with funding providers loosening the purse strings, has resulted in more deals completing.
Ambitious and forward thinking companies considering whether to grow organically or by acquisition, recognise that M&A is often the best way of accelerating the achievement of strategic goals. This certainly seems to resonate with our region’s businesses with 2016 seeing a number of North Derbyshire firms either snapping up competitors or bolting on acquisitions that complemented their offering.
The biggest deal of 2016 was technology firm Servelec Group acquiring Tribal Group’s Synergy children’s services management information system business for £20.25 million in April 2016.Servelec quickly followed this with the acquisition a month later of Target eSolutions a specialist software provider in the social care sector.
Another highlight was private equity-backed NFT Distribution, which specialises in temperature controlled freight, acquiring haulage company NR Evans, along with its seven depots across England and Wales. The estimated transaction value was reported to be in the region of £20 million.
Both Servelec and NFT secured new debt funding facilities to complete their acquisitions, highlighting the important role that banks have in lubricating the wheels of M&A.
Other notable transactions included Alfreton headquartered UPVC door and window manufacturer Eurocell. Following its flotation in 2015, which saw the initial public offering value the business at £175million, the company joined the acquisition trail, and last summer, it opened the door to Vista Panels. The door manufacturer was acquired for £7.1million on a debt and cash free basis.
On the other side of the M&A coin, 2016 also saw a number of North Derbyshire firms being bought by overseas acquirors. Highlights included the acquisition of Chesterfield based rock drilling specialist Bulroc by Finnish group Lempaala and the sale of Belper’s Abro Sealant Solutions to US conglomerate Carlisle Companies Inc.
This year it’s likely that Brexit will induce a level of uncertainty in the M&A market, but on a regional level our experience is that the outlook is still largely positive, especially when you consider the position of the funding market. This is particularly true for firms that go into deals with their eyes open, listen to good advice, carry out proper due diligence and execute a robust integration plan.
By Don Gray, a Partner at BHP Corporate Finance
By Don Gray
Partner, BHP Corporate Finance