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Strong deal volumes expected to continue post-Budget

PKF Francis Clark has reported an ongoing surge in transactions, with 22 deals completing in the past week alone – and more still in the pipeline.

The firm has advised on 12 acquisitions, two management buy-outs and six company sales in recent days, as well as raising development capital for two more businesses. Several other transactions are due to complete imminently.

Notable deals include the sale of RGB Building Supplies to Grant & Stone Group, and three acquisitions for Global Risk Partners.

While deal volumes started rising in the autumn and reached a peak in the run-up to this week’s Budget, activity levels are expected to remain strong.

Businesses with growth ambitions have a range of alternative finance options, as well as private equity investors actively seeking opportunities

Andrew Killick, head of corporate finance, said: “It’s an extremely busy time, and interestingly, our current activity levels are driven by a combination of factors, not just a rush to get deals done before the Budget.

“While those selling businesses have naturally been eager to complete transactions before any potential increase in capital gains tax that might be announced by the Chancellor, we’re also seeing a much wider range of activity in a variety of sectors.

“The big difference between now and previous economic downturns is the sheer volume of money available, especially from private equity, which has been behind many of these transactions. The enthusiasm of many entrepreneurs pursuing ‘buy and build’ and ‘growth’ strategies has also been in stark contrast to those sectors that sadly are still suffering deeply from the effects of lockdown.

“In the past, funding has been the problem, but this time businesses with growth ambitions have a range of alternative finance options, as well as private equity investors actively seeking opportunities. For this reason, we expect deal volumes to remain strong after the Budget.

Andy Killick - Corporate Finance Partner“With the next general election – and the uncertainty that it brings – just over three years away, now is a great time for business owners to consider and plan their exit. Pricing has been generally very good, as the hunt for yield continues to drive valuations upwards for quality businesses and funds appear keen to invest money and put it to work rather than adopting the ‘wait and see’ approach that was common during the financial crisis.”

Andrew added: “What I hope will come out of the Budget is more support to encourage investment in UK businesses. Tax rises will be needed at some point, but I would love to see more incentives to invest in UK businesses, which would help to create jobs as well as keeping businesses with high growth potential under British ownership.

“When most people set up a business for the first time, tax charges on exit are not on high their list of key priorities. However, for serial entrepreneurs who have already exceeded the lifetime allowance for reliefs – which are now so much lower – the UK does need to be an attractive place to do business and make gains that they can retain.”

RGB Building Supplies’ acquisition by Grant & Stone, backed by Cairngorm Capital Partners LLP, comes nearly seven years after PKF Francis Clark advised on a management buy-out led by chief executive Kevin Fenlon and finance director Paul Turner.

Matt Willmott, corporate finance director, said: “We are really pleased to have supported Kevin, Paul and the team over the last few years, firstly with the MBO in 2014 and now culminating with the successful transaction with Grant & Stone and Cairngorm. There were many interesting elements that made this transaction complex and we are delighted that Kevin, Paul, their team and all the employees at RGB have benefited.”

Our 2020 Deals Review is due to be published soon, featuring analysis of recent transactions and commentary on the outlook for deal funding. For more information about our latest deals, click here.

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