In the aftermath of the pandemic lockdowns, continued instability around the world, high energy costs and general inflation, there certainly remains uncertainty in the economy.
On the flip side, you could well ask, when have we ever had certainty?
Most of Hornblower Business Brokers’ clients have experienced an uptick in business since 2021, seeing record revenues and profits through 2022 and continuing to do well in 2023.
This may well be because the sectors we deal with, (engineering, manufacturing, logistics, IT, facilities management, and suppliers to the construction sector), continue to see good demand for their services and products.
Whilst positive for those in these sectors, there are risks and difficulties to be overcome, such as:
- How to quickly build your operational team and staff expertise? Finding the right staff is a challenge we frequently hear when speaking with business owners.
- How to quickly acquire the resource, assets and equipment to enable the growth of your business? Lead times for new equipment can be long.
- How to maintain your customer base when some will inevitably go out of business during a recession?
- How to fund the investment in staff and equipment?
These challenges often drive industry consolidation, and this is where mergers and acquisitions facilitate this process.
Mergers of two complimentary businesses can enable the companies to
- Pool staff expertise and resources,
- Increase market share through cross selling opportunities,
- Spread the risk when seeking additional funding,
- Rationalise overheads such as offices and admin functions, and
- Improve profitability
Information and Communications Technology, cyber security, SAAS, food production and delivery businesses are often relatively new businesses – run by owners who do not wish to simply retire. They are ambitious to grow, but perhaps need to join forces with other like-minded business owners in order to do so. Mergers can also represent the first step to a final exit strategy with a higher valuation.
Generally, the larger and more sustainable the business is, the higher the multiple used to value the business. Merging two smaller businesses creates one larger business which can be valued at substantially more than the sum of the two individual businesses.
To find out more about merging, get in touch with Henry Campbell-Jones at Hornblower Business Brokers, or sign-up to Hornblower’s monthly newsletter, where they list all their latest Businesses For Sale.