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The business press has been filled with stories of mega-deals for decades. Little surprise, the pipeline of consolidation deals among titans of industries has been plentiful since the turn of the millennium.
According to recent statistics, deals for overseas companies to acquire UK businesses are still occurring at twice the rate of domestic agreements. Clearly, UK PLC remains for sale to the highest bidder, but buyers continue to be a little cautious.
As with most major economy shocks, there are winners and there are losers. While many companies were completely caught out by COVID-19, others are in a position to benefit.
Mergers and acquisitions are expected to see a surge in the next two years, as companies look to overcome the recent economic malaise and get back to some semblance of future planning. The pandemic and Brexit have both exposed the dependencies and weaknesses of many businesses, prompting them to diversify and expand into new markets or acquire new expertise to reduce their exposure in the future.
It has been announced that Keurig Green Mountain is to merge with Dr Pepper Snapple in what’s been described as the biggest acquisition involving a soft drinks company.
The number of complaints lodged against British gambling companies has increased by 5000% in the last 5 years, according to BBC’s Panorama. This is apparently largely due to unpaid winnings and ‘failing to operate in a socially responsible way’.
The overall performance of the industry appears to have suffered in recent years as 131 companies out of the top 735 have been making a loss for two consecutive years.
The Plimsoll analysis gives every company in the industry a rating which ranges from ‘strong’ to ‘in danger’. The analysis of all UK gambling companies shows that 50% of the market is rated as either ‘in danger’ or ‘caution’.
With the industry’s overall performance slipping, could companies simply be trying to improve their performance and grow through other means such as stricter payout criteria or more aggressive marketing and retention strategies?
Whether this is a deliberate strategy or not, how effective it is remains to be seen and it appears to be jeopardising the industry’s reputation.
Three different types of acquisition in a post-COVID world
Eddie Stobart who recently suspended trading of shares after a multi-million pound accounting error that saw the firm’s profits shrink to a level which the Board has described as the ‘low end of expectation’, has been approached for potential buy-out by Dbay Advisors.
The road haulage firm started the year with an impressive performance, defying potential Brexit concerns with the prospect of a March departure, but suffered after a multi-million pound accounting error saw a decline in share performance. This could be what has motivated the firm that hold the third-largest share in Eddie Stobart to begin buy-out negotiations.
Plimsoll’s Road Haulage industry analysis shows consistent improvement in Eddie Stobart’s overall financial rating from 2014 to 2017. The company also came 7th in the industry for pre-tax profits, and 3rd in total sales in the industry back in 2017.
The UK restaurant sector has seen what appears to be surprising turmoil over the last few months. But are its problems really so unexpected?
Like many things throughout 2020, for some companies acquisition activity has been on hold. Companies large and small have focused on keeping their head above water as customers dried up, or in some sectors battled to cope with red hot demand. Is a perfect M&A storm brewing?