A recent M&A Monitor report shows positive signs of growth in M&A activity involving mid-market companies in the UK and Ireland.

The report published by Dealsuite, the international platform for M&A transactions, summarises research on statistics and trends in M&A activity among mid-market companies during the second half of 2021 (H2-2021).

Collating research from M&A advisory firms across the UK and Ireland, the report’s findings demonstrate a significant increase in activity and a positive outlook for 2022.

M&A transactions on the rise

Business services continued to report the highest number of transactions out of all sectors, claiming one in four of all transactions in H2-2021.

Increased transactions were also reported within the media and communication sector, while the industrial & manufacturing and construction & engineering industries also experienced significant increases in 2021.

M&A activity in the hospitality and tourism sector also began to show signs of recovery during H2-2021.

EBITDA multiples varying by sector

The average value of SME deals increased in H2-2021, whilst the average EBITDA multiple for all sectors was reported to be 5.45x, consistent with the 5.5x reported during H1-2021.

As always, multiples varied significantly between sectors; the report finding that the Construction & Engineering and Automotive, Transportation and Logistics sectors both attracted an average of 3.7x, whilst the Healthcare & Pharmaceuticals sector saw an average of 8.5x.

Further recovery was reported within the Hospitality & Tourism sector with the average multiple increasing to 4.5x.

Selling businesses

The most cited driver for selling a business was shareholders’ age and a lack of succession options. Continuing its downward trajectory, the average age of a selling entrepreneur is now 55 years old.

The duration of a sale, from ‘obtaining the mandate’ to ‘closing the deal’, varied considerably and the report found that more than half of sales processes last 6 to 12 months.

However, the vast majority (82%) of sales processes guided by an expert M&A advisor had a duration of less than 12 months.

Optimistic outlook for 2022

Mid-market performance in the UK and Ireland is influenced by a variety of factors, from funding availability to macroeconomic developments, making it difficult to predict future M&A activity.

Whilst the early months of 2022 have demonstrated continued economic recovery, we are now facing inflationary pressures with prices rising faster than at any time in the past 30 years – not least driven by energy price rises. The stock markets, already down since the start of the year, have dropped significantly further in the wake of Russia’s invasion of Ukraine.

However, the general consensus for the year ahead is one of optimism with 91% of advisors reporting a positive outlook for H1-2022. The outlook for PKF Smith Cooper’s corporate finance team is exceedingly optimistic and we continue to help business owners realise their ambitions.

How we can help

With M&A activity increasing, 2022 could be the time to sell your business or alternatively look to expand through acquisition.

Our highly accredited and award-winning team work closely with clients, formulating bespoke strategies that are both commercially astute and informed by the market but also maximise and highlight the strengths, opportunities, and value-drivers of your business.

Find out more about corporate finance services at PKF Smith Cooper. If you would like M&A support or further business advice, contact us to find out how we can help. Subscribe to our insights to receive future articles directly to your inbox.