Round table report: Rainmakers take temperature of 2023 deals market

The last two and a half years have been strong ones for the Midlands rainmaker community. But, with economic headwinds prevailing, will 2023 be able to claim the same?

Our latest Rainmakers round table, at EY’s Birmingham office, brought together advisory specialists and businesses who had recently acquired others to discuss how they see the next 12 months in the deals sector.

Tom Horton of Thincats was bullish about the prospects for 2023. He said: “There are different factors at play. Post-Covid, business owners are very aware of the wealth they have tied up in their business. I’m confident about both volumes of business activity and Thincats’/funders’ liquidity.

Ragi Singh of Gowling WLG said he thought that everyone was a little more robust, post-Covid. He added: “There are plenty of cash-rich corporates/funds still out there, and in any market there are always sellers selling for myriad different reasons. I think therefore we will not see the M&A market grind to a halt and we will see a sufficient flow of transactions over the next 12 months which we will all have to work a little harder to identify and transact.”

Dan Salt of EY added: I’ve not met a business owner yet who has said: ‘Why should I buy a business this year?’. There are some good businesses out there who are ripe for acquisition.

The last couple of years given a lot of business owners time to think, said Matt Newbold of LDC. “Business owners have asked themselves about their own personal objectives and about the four or five years of investment plans. There remains lots of appetite for acquisitions.

Tom Moore of WBR Group said that acquisition is his company’s route to becoming bigger a lot quicker. He added: If you need impact, you need scale – and that means an acquisition, which is the quickest way for small players to become bigger. It would’ve taken us 10 years to create 50 jobs, and I’d have been knackered. It’s all down to having the energy and confidence – means an acquisition.

Newbold added that although he could see some headwinds over the next 12 months, deals professionals are “battle hardened”. “Compared to Covid, the next year looks like a walk in the park for business owners,” he said.

Salt thought that business owners are rationalising, adding: “They’re going back to thinking about what makes their business great- and running quite lean.”

Brian Mullin of Marrons Planning thought that there are always going to be good opportunities to buy tired businesses who have emerged from the pandemic and whose management team have run out of energy.

Horton thought that communication was the key. He said: “I’d like to see how much businesses spoke with others in their industry in the last three years continue. SMEs are far more resilient than most gave them credit for. If they can retain collaboration that was fostered during the pandemic, then they’re in a good spot.

Horton said he thought that every good business should go out and at least consider buying another business. He added: “If you want to grow, even if you don’t transact, it will help you see what’s good and bad in a every business in your sector.”

Moore agreed, and added: “It’s very easy to get into a clique if you don’t open up to other people. The great strength of owner-managed businesses is they’re very real; they’re very different to working for a big firm. However, SMEs can create echo chambers – the people at the top need to realise that there are other people out there who ‘get it'”.

“I’ve not seen a fundamental erosion in the quality of businesses out there,” said Dan Salt. “If there’s an immediate problem, then the deal will collapse like a house of cards. And so we’re only putting forward good companies.”

Before the discussion ended, I asked the panel what’s the one thing should business owners or entrepreneurs do over the next 12 months if they’re looking to get a deal over the line?

Moore said that the best thing to do is get funding sorted early on, while Horton thought that taking soundings from those who have been through the fundraising process before was vital.

“Make sure you have the bandwidth to do the deal,” said Singh, while Salt thought that Deal 101 is “Ask yourself ‘why?’. You should never buy a company simply for vanity reasons.

Brian Mullin’s top tip was to be forensic. “What value is there to add to your business?” he said.

Newbold finished by saying: “Surround yourself with good advisors you can trust. A deal will take up more time than you can ever imagine.”