Merger and acquisition (“M&A”) activity has continued to play an important part in the corporate activity of our region’s largest companies, notwithstanding the ongoing uncertain economic outlook.
Many organisations have taken the opportunity of the economic slowdown to review their strategic focus to determine which operations fit best with longer term plans to build shareholder value.
A good example of this locally is the region’s largest company SIG plc which in the past year has disposed of three subsidiaries deemed to be “non-core”.
Such transactions can be a win-win for all parties concerned. For the seller, the sale of a non-core business allows capital and group management time to be targeted on those activities which will generate greater returns on investment.
For the companies that are being sold it is often the case that their new shareholders will be willing to invest more to realise the businesses’ full potential - thereby breaking the cycle of what is sometimes referred to as “orphan” subsidiaries.
Another key trend that we have seen at BHP Corporate Finance is the increasing presence of strategic international purchasers looking to invest in to high quality UK assets. A good example within the Top 100 is the recent acquisition of a majority stake in food chain waste specialist Prosper De Mulder by German multi-national Saria Bio-Industries. The investment by Saria is expected to support Prosper De Mulder in expanding its market leading offering in anaerobic digestion and biomass facilities. Based on our own pipeline of deals we expect to see continued activity from multi-nationals looking to acquire companies in the Sheffield City Region.
Despite having to adjust to the constraints of the new leveraged debt environment, private equity continues to play an important part in shaping the Top 100. Notable recent private equity transactions in the upper echelons of the Top 100 included the acquisition of DFS Furniture Group by Advent International and the merger of Caird Capital’s social housing and construction portfolio companies Keepmoat and Apollo Group.
Elsewhere in the Top 100 a number of the region’s leading companies continue to execute their growth plans through acquisition. Examples of this include Gilder Group’s acquisition of fellow South Yorkshire motor dealership Peter Brooks to build on last year’s acquisition of Newark based Heron. Other Top 100 companies completing acquisitions included Gordon Lamb, AES Engineering and William Cook.
So whilst we may be some way from seeing deal activity return to “pre-Lehmans” levels, our region’s Top 100 companies have demonstrated that M&A strategy remains a key part of the corporate toolkit irrespective of the economic outlook.