Welcome to issue 40 of Deal Dispatch, our corporate finance division’s regular deal round-up.

It has been yet another intense year of dealmaking across the Midlands in 2022. Whilst the national picture may look bleak with a 14% drop in deal activity, the Midlands remained resilient, recording just 4% fallback from last year’s record high. In fact, Midlands deal volumes for the last 2 quarters have out-performed the prior year’s quarters, with Q2 up 13% and Q3 22%

At PKF we continue to see good levels of dealflow and new prospects, partly fuelled by shareholders’ fear of a change to capital gains tax rates (“CGT”). This is both over concerns of an increase in the next budget or through a change of Government in 2024. A CGT rate increase of 10%-20% will have a material impact on a shareholders net realisation which can only really be offset by increasing profits by 10-20% to compensate, with many thinking this is unlikely to happen in a
challenging economic environment. This is causing many shareholders to consider crystallising value in 2023.

Appetite for acquisitions remains strong, from both strategic trade purchasers and private equity players keen to create synergies and economies of scale, which can offset margin pressures and create growth in shareholder value. Whilst valuations from private equity appear to be softening given the increased economic uncertainty and rising cost of capital, strategic trade acquirers appear to be holding valuations, at least for the time being.

However, history shows us that private equity make high returns on investments made in times of economic uncertainty and tend to outbid trade acquirers. They remain keen to partner with management teams and shareholders to take advantage of market conditions, and drive significant growth and value for those involved, meaning there are ‘deals to be done’.

If you would like to discuss your growth or exit plans please do get in touch.  We at PKF wish you a very merry Christmas, and look forward to supporting you in what we hope will be a terrific New Year for you.

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