The South East M&A market in 2019: the story so far

31 May 2019

The good news is that for the first half of 2019 the market remains strong and deal values are rising.  The same positive indicators we saw throughout 2018 are still in evidence: high levels of private equity money looking for investment, and larger companies with money to invest looking to buy and grow.  Both investor groups see organic growth as challenging.  Private high net worth money continues to look at investment opportunities, given lower stock market growth and less confidence in the property market. 
Balancing the equation, there are some negatives including a general feeling that a market correction or slow down is over due and, of course, the yet to be resolved Brexit question!  The impact of these twin pressures is that deals have continued and values are rising, but a renewed focus on diligence in the last six months has extended some deal timetables.  For some deals this is putting pressure on up-front cash, moving into earn out or deferred payment; for others financing pressure is impacting.  There is a reluctance to admit that the Brexit question is causing any of these issues, which is interesting in itself.
Come to market well prepared
Companies looking to come to market need to be well prepared and with strong advisory teams: of course you would expect me to say that, but it really is the only effective way to deal with extended diligence processes and handling price negotiation after heads of terms have been signed.  Assessing risk and making a judgement about whether a deal remains viable is best done with finance and legal advice operating closely together.  
We have also seen more deals with vendor diligence prepared in advance.  This creates an auction process, where you provide full information up front with a view to creating competition between buyers, and leading to faster deal completion once a price has been agreed; it’s one way to defeat the extended diligence risk/price renegotiation, but it does mean higher up-front costs for sellers.
MBOs continue to receive debt finance support at the sub £5m deal level, where the business relationship with the Bank is strong; partial or two stage exits remain popular as owners seek to de-risk and transition ownership.
Warranty and indemnity insurance
The other trend fast gathering pace is warranty and indemnity insurance for deals over £10m.  This product has been available for years but until recently has been used more in larger deals; essentially for a premium of 1-3% of cover, you can insure the risk of warranty claims and claims under the tax covenant.  Of course you have to decide on the level of cover and link to the sale agreement, but it is now far more accessible and attractive, particularly where family trusts or family holding companies are being created.  The insurance market has developed to the point that processes are  slicker and there is more choice in the market.

Further reading

DMH Stallard advises Optiva Securities as broker to Asiamet Resources in £10 million equity fundraising

News & PR
Nick Williams advised Optiva Securities Limited on its role as broker in arranging a successful firm placing and accelerated bookbuild placing for Asiamet Resources Limited.
Read more Read

DMH Stallard advises Whyte Bikes on private equity investment

Blog, News & PR
Helen Mead led the team advising innovative bicycle manufacturer on investment
Read more Read

SDLT: the holiday the housing sector would like to extend

Blog, Legal Updates
Raising the SDLT threshold in 2020 kept the housing market booming; Rachel Munroe considers what developers would like to see in 2021
Read more Read

The Supreme Court & Vicarious Liability: The Importance of Worker Status

HR Professionals have primarily been concerned with Covid-19 and its impact on their businesses, but there have been other significant developments in employment law relating to vicarious liability.
Read more Read
  • Brighton Office

    1 Jubilee Street


    East Sussex

    BN1 1GE

  • Gatwick Office

    Griffin House

    135 High Street


    West Sussex

    RH10 1DQ

  • Guildford Office

    Wonersh House

    The Guildway

    Old Portsmouth Road



    GU3 1LR

  • Horsham Office

    Ridgeland House

    15 Carfax


    West Sussex

    RH12 1DY

  • London Office

    6 New Street Square

    New Fetter Lane


    EC4A 3BF

  • Get in touch