The UK contract catering market contains 66 ‘high-class’ acquisition targets. That is according to Plimsoll’s latest assessment of over 600 contract caterers. This brand new research has identified this group of 66 firms which represent the most appealing acquisition prospects for those looking to expand in the sector.
Plimsoll’s latest study shows that acquiring one of these 66 “high-class” acquisition targets would enable prospective new owners to move into growing and highly profitable areas of the market.
Despite the fact this category of companies may cost a premium, “high-class” targets offer potential investors a real opportunity to strengthen their position in the market and allow the company to continue on its upward trajectory.
25 of the listed 66 companies are currently ranked as highly profitable and would offer the chance to move into a higher margin part of the market. Most of these companies are privately owned meaning negotiations should be less arduous. A further eight of these companies are growing at over 10%.
Plimsoll’s study also notes that the typical acquisition strategy of acquirers looking for a cut-price deal by preying on struggling and vulnerable businesses might be under pressure after Covid and Brexit. The number of companies, among the 600 in the report, rated as Caution or Danger, an early warning of financial trouble, has risen to 269. The sheer number of companies struggling means the chances of buying a “falling knife” are increased. Perhaps better to pay more for a premium target?
It is a long-standing debate when considering an acquisition, do you buy cheap or high value? In reality, most people’s idea of an acquisition is to wait until the business has declined to such an extent that it requires rescue. New owners sweep into the rescue, restructure, and subsume into a wider group resulting in a cheap path to scale.
In 2023, the latest Plimsoll Analysis is offering another option. The acquisition strategy should be based on the direction of the current market. Acquiring a premium, successful business, gives both the company a chance to “cash out” having taken the business as far as they can and new owners can bring with them new markets, new expertise, a stuffed order book and a solid business.
For those still looking for distressed M&A targets that could be bought and turned around, there is a growing well of options. As mentioned, Plimsoll’s latest assessment of the market has rated over a third of UK catering companies are in financial trouble.
Within our report we apply a further level of M&A analysis and insight, looking at ownership structures, future potential and more to weed out the best prospect. Based on our work, we have identified 131 companies as being “Highly Attractive”. These companies present the best opportunities to buy another business to turn around post-acquisition.
At Plimsoll, we believe entrepreneurs and business leaders in the catering sector need instant access to decision-ready intelligence. We believe we can help you make better decisions, more quickly and without the hassle.