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Overseas acquisitions increases after Brexit

Posted on Jun 15, 2017

Overseas corporations and investors have stepped up acquisitions of UK businesses since the EU referendum, according to market analysis by Kingsclere-based BCMS.

The business sale advisor said around 25% of the 4,500 UK companies sold in the nine months to the end of March went to an international buyer headquartered abroad, with European, American and Asian acquirers all increasingly vying with each other to snap up UK SMEs.

The UK’s open business culture, and the enduring reputation for innovation among home-grown SMEs are helping drive this surge of interest, BCMS added.

BCMS chief executive Steve Dally said: “The strong appetite of overseas acquirers for UK SMEs is good news.

“It gives entrepreneurs more options when seeking to grow or sell, creating a competitive bidding scenario to drive up the asking price.

“It’s also accompanied by follow-on investment in equipment and restructuring, which is typically positive for job creation and beneficial to staff career development.

“Traditionally, interest has always been strong from North America and Europe, but with more big players from Japan, India and China joining the fray, it still feels very much like a sellers’ market.”

The trend is borne out by BCMS client businesses who sold to overseas buyers in recent months.

These include school gym equipment supplier Sportsafe – acquired by ABEO of France; hospital furniture maker Sunflower Medical – sold to Indutrade of Sweden; and motorsports engineering firm BRP Composites – bought by Indian aerospace group Neterwala.

Searching far and wide

As a result of increased overseas appetite, the ‘deal-making’ community of advisors, lawyers and accountants are having to invest in language skills and data to globalise their operations to find potential acquirers.

For example, BCMS – where staff speak 27 languages between them – has recently welcomed new recruits from countries such as Brazil, Venezuela, South Africa and India, to complement existing UK colleagues based in Kingsclere, and the BCMS northern office in Haslingden.

Steve Dally said: “There are many reasons why an entrepreneur decides to sell up, but there’s no point having a great company on the books to sell if no one knows it’s for sale.

“But not all advisors can afford to invest in this global approach, and it’s really noticeable later on in the process, with little or no interest, and a business owner wondering when they’ll be able to pass on the company.”

Why big foreign companies buy SMEs

So why do multinational groups chase after small UK businesses? Generally, there are three reasons – although this depends on what sector they operate in.

Buyers from emerging markets often want to acquire technology and know-how to use in their home markets.

For North American companies, buying a UK subsidiary is either a first step to international expansion, or they are already global – and already in the UK – and looking to add further capabilities.

Elsewhere, European acquisitions into the UK are often about offering customers pan-European coverage, or simply to gain market access to the world’s fifth biggest economy.

Entrepreneurs’ dilemma

When owners sell up, the most common dilemmas are based on whether the final buyer is the right choice, and, of course, their offer, payment and terms.

By having a wider choice of buyers, the owner-director significantly increases their chance of selling, achieving maximum value and the peace of mind knowing that no stone is unturned in the search for the best fit acquirer.

Despite some concern about the level of foreign ownership of UK businesses, BCMS says that, at SME level, the benefits are overwhelmingly positive for the vendor, their staff and for the local economy.

Overseas corporations have been a longstanding feature of the UK business landscape, and in the aftermath of Brexit and Trump the signs are that this looks set to continue.