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Business owners alerted to expected M&A pick up

There have been a record numbers of deals struck in the first half of the year, and the rest of 2023 could be similarly busy if inflation eases

Consolidation in the channel is a feature of the market that is well-established and has continued even in the face of economic headwinds.

The past few weeks have seen deals struck by the likes of Node4 and Air IT, with firms such as iomart signalling it will continue to be active in the M&A market, and others like SysGroup revealing how acquisitions have positively affected the bottom line

According to the latest M&A analysis from EY, there was a 16% rise in deal volumes for H1 in the UK, totalling 160 deals, which was a 10-year high. Although the number of deals were up, the value of those average deals dropped.

The economic situation has affected the values in the M&A market, but the expectation is that there will be more activity towards the end of the year.

M&A experts are warning those that want to sell that they need to be in a position to react if an expected fourth-quarter surge in investments happens as a result of declining inflation and improved market conditions.

There is also a growing appetite around AI and other emerging tech categories that should attract investors and encourage business owners to pull the trigger on expansion plans.

“During periods of uncertainty, companies and potential acquirers have adapted their investment strategies, resulting in the current deals market. Although the current economic cycle differs from previous ones, there is still a significant amount of capital available for M&A transactions,” said Claire Trachet, CEO and founder of Trachet.

“I firmly believe that companies that can leverage this capital and execute deals early in a downturn have the potential to outperform others in their industry – we will begin to see this towards Q4 of this year once investor confidence picks up.

 “I believe this time should be used to encourage founders to be looking to opportunities in the near future when it comes to entering a deal making process. Revisit and reassessing M&A best practices in terms of deal strategy, leadership, capital, customer experience, operations and the workforce are all key considerations, as well as the psychological impact of uncertainty on risk tolerance and the challenges associated with declining M&A capital and debt management,” she added.

For some, the next six months might be a moment to evaluate if selling is the right option, but owners and managers at smaller companies might face attachment issues letting their business go into other hands.

“If you can see the end of the runway, then you shouldn’t be shy to let go. An M&A should not be seen as the end, but rather the beginning of a new chapter with someone bigger, more resources, and someone who will better support and serve the business,” said Trachet.

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