The evolving shape of regional M&A in the East

Accountancy: Ensors part of Azets

This is not due to a lack of dynamism. The area is blessed with energy. Life sciences, advanced manufacturing, agri-tech and specialist technology businesses, many clustered around the research eco-systems of Cambridge, grow quickly and tend to exit sooner.

Elsewhere in the region, the market is different but still robust.

The average age of sellers in SME deals will be higher across Essex, Suffolk and Norfolk, with many sales being retirement-driven. This is not a weakness; instead it provides a steady flow of opportunities to the M&A market. These companies tend to be long-established, relationship-driven businesses with real character.

In the past, these types of solid businesses were ripe for Management Buy Out (MBO) as well as external sale. MBOs often provide the spark and fresh impetus to drive a business on to new heights, while retaining the soul and spirit of the company.

A shift in cross-border dynamics

In recent years, there has been an evident shift. Private equity interest in the region was piqued in the early 2020s and has continued to accelerate. In more recent years, international buyers have also targeted UK-based businesses for strategic reasons.

The end result is a regional market with a plethora of differing options for succession, including sale to a trade buyer, an international buyer, a private equity buyer, MBO or Employee Ownership Trust.

Building towards an exit

Being a succession-fuelled market means that there are some inherent weaknesses. Many owners do not want to think about planning towards their exit as it is subconsciously linked with the final chapter of their career.

Due to this, too many businesses are not prepared for sale when they receive a knock at the door and an offer too good to refuse.

Preparing for sale does not mean wholesale changes. It can be as simple as ensuring there is robust monthly management information. This drives confidence in performance, which in turn makes it easier to achieve a higher price.

With the luxury of time, a business can also review its working capital processes with the aim of unlocking additional cash for its valuation.

We often undertake a red flag review (a focused, high-level due diligence exercise) for businesses thinking of going to market in the mid to long term. Even though an exit is not imminent, it can provide peace of mind that they are prepared if there is a knock at the door.