M&A activity defies dire Brexit warnings

It will come as no surprise for Cambridgeshire-based business leaders to hear that the East of England was one of the UK’s leading regions for mergers and acquisitions (M&A) activity in 2017, ranked behind only Greater London and the Republic of Ireland for transactional value. And as the jewel in the region’s crown, Cambridge and the surrounding area are proving popular with business buyers in the UK and internationally.

“The M&A activity is being driven largely by the quality of the tech, in the broadest sense of the word – the knowledgebase that exists, and the fantastic start-ups and growing businesses in the Cambridge region,” says Simon Blake, Partner and Head of Strategic Corporate Finance for Price Bailey.

“It’s an attractive place internationally, and – in the same way as Silicon Valley, and Cambridge MA (Harvard and MIT) – it’s a place where real knowledge creation happens. In relation to M&A activity, that transcends normal multiples; we know that organisations like Apple and Google will be attracted to buy businesses and invest in Cambridge because they need the talent.”

With one of the largest corporate finance teams in the East of England, Price Bailey’s confidence in a strong M&A market (despite some dire warnings around Brexit) has been rewarded with the completion of a number of significant deals, and total growth for the company of 25 percent over the two years to March 2017.

“Our focus is on owner-managed businesses, and the level of activity here is as high as ever, regardless of Brexit; I think the entrepreneurial client-base works very much on the ‘here and now’,” continued Simon. “While the volatility of Sterling has been an issue for some, the main outcome of the weaker pound has been that overseas investors and businesses, particularly in the US, have been on a buying spree, which is obviously to the advantage of our UK client-base considering making a sale. With overseas buyers able to buy more competitively, serious players are willing to pay more to put themselves in the driving seat for particular deals.”

With many of Price Bailey’s owner-managed client-base already trading internationally, and potential buyers of their businesses being internationally focused, overseas corporate finance and M&A has become an integral part of the company’s activity. But Simon believes the firm’s innovative approach to this and other areas of business is reaping rewards for the company and clients alike.

“The international focus is part of everyday life for us, and it’s about making sure we have deep relationships around the world,” says Simon. “It’s not about lists of franchise members that our brand may have globally; we believe it’s important to meet and understand the people that we work with face to face.

“So when, for example, my Cambridge client is looking to open an office in Boston or San Jose to tap into the resources and technology available there, we are in a position to introduce them to the best professional contacts, in the right location, based on the working partnerships and relationships that we have built up through our own direct experience. Few accountancy firms, regardless of their size and reach, have the chance to build those personal relationships at international as well as national and regional levels, and I think that’s contributed significantly to our strength in the M&A sector, particularly on the international stage.”

That strength in the market place was highlighted by the role the company played in the acquisition of Royston-based e-assessment specialists EnlightKS by leading career development firm PSI Services. “We worked for the sellers in that original transaction, which was finalised in January 2016, but the buyers then approached us and explained that they were looking to make more acquisitions in the UK and Europe, and asked if we could help them,” says Simon. “Since then we’ve worked with PSI on a number of deals in the UK, as well as in Switzerland and Dubai. We advise on the M&A side, and drive the financial due diligence ourselves, but where necessary work with local jurisdiction tax advisers within our international network to do the tax piece. It underlines once again that US companies looking to build business internationally want to use the UK as their launchpad for Europe.”

Price Bailey have also been working with Pioneer Foods Group, owned out of South Africa but with factories in Peterborough and Wellingborough, on two acquisitions of Cambridgeshire companies in the last couple of years. The first was Wisbech-based Stream Foods, producer of the children’s snack brand Fruit Bowl, and more recently – just before Christmas – they acquired the UK granola brand Lizi’s which they have produced under licence in Peterborough for some time.

The Christmas period also saw the completion of another transaction that the Price Bailey corporate finance and specialist tax teams advised on being, the sale of Discuva Limited to Summit Therapeutics, a UK and US-listed drug development group. “Discuva is all about new technology in the antibiotics field, and was an attractive proposition for Summit because of the research they are carrying out, and the platform they have created for new drug discovery,” adds Simon. “That’s the kind of thing that overseas buyers come to Cambridge for. And regardless of Brexit, I don’t see that appeal to international buyers, or the level of M&A activity, dropping off or changing dramatically in the mid to long term.”