Exclusive: Deal-making to surge due to ‘perfect storm of returning optimism, loosening restrictions and undervalued firms’
The market for mergers, acquisitions and other deals has, in the past two years, weathered periods of quiet during lockdowns and periods of boom as the economy reopened and optimism returned.
This high demand looks set to continue well into 2022 with a new survey indicating that 90 per cent of dealmakers expect stronger activity over the next 12 months.
Much of this demand is expected to be driven by distressed deals and cheap UK companies, as analysis from Schroders indicates that, on average, UK companies are undervalued by around 30 per cent.
Further to this, at points in 2021 deal volumes were at their highest since 2006.
The volume of deals has been noticed by professional service and accounting firms, a sector which has seen a far quieter year given Covid-19 and Brexit.
City PM caught up with Chris Biggs, partner at consultancy firm, and self-proclaimed accounting disruptor, Theta Global Advisors, to discuss how UK financial services firms such as his have pivoted to offer flexible resource and the impact of this on UK deal markets
“I can see 2022 being a historic year for M&As and other kinds of deals as a large amount of uncertainty melts away that has lingered from Covid and Brexit.”
Mid-sized firms have disrupted the sector this year, taking on many of these large clients, and offering more tailored solutions to clients.
“It is a perfect storm of returning optimism, loosening restrictions and undervalued firms.”
Chris Biggs, partner at Theta Global Advisors
As such, this is an opportunity for these firms to further monopolise and aid both buyers and sellers in the private sector to ensure neither party falls flat at a time of rapid deals, and surges in cashflow and financial backing driving deals quicker than ever before.
These firms are standing as the flexible resource keeping the deals market afloat at key times when the difference between a deal going through and it falling through can be a matter of minutes.
Smaller firms benefit
Biggs revealed to City PM that his firm has been instructed on a number of deals in the past few weeks and “this looks set to carry on for the foreseeable, something that will be a boost to firms and especially those below the Big Four.”
“Companies are beginning to understand the scale of opportunities that exist in the M&A sector and this will require a sharp increase in the available resource in getting these deals done in time.”
“The UK has set up a plan for recovery that is extremely investment-friendly post-Covid.”
“Despite the initial impact of Brexit with deals and investments moving abroad, we are seeing the financial services sector adapt, with mid-sized firms offering agile, diverse services to their clients with less risks for conflicts of interest we have seen previously,” Biggs continued.
“As businesses look to avoid actual or perceived conflicts of interest, I can see a big shift towards smaller firms. It is easy to get lost in a sea of big clients if your firm is not a key account, but when working with smaller accountancy practices your needs are prioritised no matter how big you are. This has come into increased focus throughout the pandemic and will continue long beyond it,” he concluded.