Deal or no deal after Brexit? The signs are encouraging

editorial image
0
Have your say

This year’s Rapid Growth Survey shows that companies in Sheffield City Region achieved record levels of growth.

The top 30 companies on average achieved revenue growth of 102 percent. This is the highest average growth recorded since the survey’s inception in 2008.

First time appearances from well-known businesses such as Parseq, Kaye Aluminium and Riverside Motors have entered the Top 30 in part due to completing multiple acquisitions.

Growth through acquisition is sometimes seen as a riskier option compared to organic growth, but it can often be the only option for companies looking to fulfil certain strategic ambitions, ranging from increasing market share to securing the supply chain and reducing operational risk.

Confidence is a key driver of merger and acquisition activity.

Brexit has and will have implications across the corporate decision-making spectrum, sole-trader to multi-national business alike.

Unsurprisingly therefore, clients are asking us what impact Brexit might have on their acquisition strategies.

It is of course too early to be definitive and the answer will naturally depend to some degree on the sector in which the business operates.

The early signs are however encouraging. Over the past couple of months we have seen a number of corporate deals complete as well as transactions completing using private equity funding. Clearly these deals were well progressed prior to the vote, but the key aspect is that the investor’s confidence in their strategic rationale and the robustness of the target company, meant that they could see past any potential short-term issues.

Inevitably Brexit raises some additional challenges.

Our clients are responding to these through greater stress testing of assumptions, modelling additional sensitivities, considering foreign exchange hedging options and implementing flexible financing structures. Instability brought about by constant changes, especially in the political and economic landscape, can make taking decisions a harder task than it might ordinarily have been.

However, it remains the case that the right acquisition done at the right time can be an important element of a company’s growth aspirations.

Deal or no deal? For acquisitions that are properly structured and underpinned by robust strategic rationale it remains very much ‘deal’.