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For local independent or family-owned Welsh businesses 'change of ownership’ can provoke fear and apprehension arising from inevitable inexperience, emotional legacy ties, staff welfare concerns, loss of control, corporate mortality denial or ‘life after’ uncertainty.

At the same time, a new owner’s leadership, performance track record and financial resources are key priorities for vendor’s consideration.

Transition, specifically through M&A (merger and acquisition) transactions, should not be seen as the end of a business’ era, or last resort for a distressed business, but an exciting opportunity, essential to scaling the business, not just for the old and new owner’s benefit, but for safeguarding valued employees, community and economic contribution.

Succession is still neglected by the majority of business owners whether family, corporate or employees. A robust succession plan and preferred outcome, whether it be through an external disposal, an internal management buy-out (MBO), an employee-ownership Trust (EOT), or even a simple share transfer to next of kin, often protects other stakeholders, including customers and supply chain contributors.

From the acquiror’s strategic perspective, the principal aim is to capture sustainable, profitable, growth which is not organically accessible. Gaining greater market share or entering a new geographic region with indigenous connections accelerates scaling-revenue, and economies of scale driven cost savings, enables human and physical capital leverage and eliminates operational duplication.

Access to new talent, know how, protective patents, extended distribution networks or technology platforms provide a rich seam of opportunity for expansion.

Change of ownership rarely results in homegrown companies leaving their locality. This is due to the rooted, loyal employee base, supplier and distribution networks plus other economic factors which override the case for disruptive relocation.

A classic example of this is Newport Wafer Fab, now known as Vishay Newport, following its acquisition from Chinese-owned Nexperia for £130m and investing £37m.

This silicon chip manufacturer started in 1980 as Inmos and has had Asian, European and American owners, all for different strategic reasons, yet remains a valued member of the compound semiconductor cluster in Newport, a significant contributor to its local economy and community.

In essence M&A preserves and enhances economic value as well as being a prime entry route for foreign direct investment (FDI), driving cross-border investments and capital expansion into local companies. Newport Wafer’s history highlights the impact of ownership adoption, exported revenue and creating sustainable, well-paid jobs.

KLA (USA) Corporation is another FDI corporate which acquired SPTS Technologies owner, Orbotech in 2019, choosing to invest in a 237,000 sq ft facility for 750 employees in Newport, South Wales. The company is investing £100m in its R&D and manufacturing centre and facilities for new technologies blue chip global customers whilst significantly benefitting the predominantly local and extensive supply chain’s own growth prospects.

Extensive research on Welsh exits over the last 25 years by this firm indicates that over 80% of those which changed ownership during that time are still present in Wales.

It is not the case that 20% have gone away, but many may have changed strategy, ceased to trade or been taken in-house by large owners restructuring processes.

Cwmtillery Glass Centre (º£½ÇÊÓƵ-owned), Safety Letter Box, (German), Peters Foods Services (Welsh), Orangebox (USA), to name a few, continue to run significant operations in their niche sectors, contradicting the idea that Welsh businesses disappear or move away, by virtue of ‘changing ownership’.

We do not need to look too far west to Ireland, which has created a magnetic environment for targeted inward investment which fuels its stellar economic performance. Ireland’s FDI has focused on fostering talent and identifying skills required for up-and-coming technologies such as AI, fast growth sectors including IT, life sciences and pharmaceuticals.

Anticipating the future has enabled the Irish to train and retain highly skilled workers and deep root supply chain opportunities for inward investors relocating or acquiring businesses in the Republic, which after all is EU. The fiscal tax benefits are an added enabler but there are other ways in which Wales can provide enticing financial incentives, a worldwide accepted practice of inducement.

Ireland’s strategic investment approach majors on growth-stage start-ups, excelling at integrating ESG frameworks, with regulatory compliant pathways to facilitate investor ready companies ripe for investment by foreign corporate venturers. This is within Wales’ capability too.

We all agree that Wales must position itself as a country that promotes digital technology, invention and clean energy production. Fostering talent, supporting early stage and scaling businesses within investment zones and innovation distinct environments is vital as is embedding genuine ESG (environmental, social and governance )credentials. This is essential for delivering inclusive, economic wellbeing and recurring foreign interest in Wales.

There is nothing to be ashamed of in creating world leading companies that ambitious investors, whether local or global, want to acquire and grow when incumbent owners wish to move on because they have accepted that it is time for orderly succession. After all it is just a stage in the business life cycle, preparing for the next era of corporate life and preserving valuable local economic impact.

• Frank Holmes is a partner with corporate finance boutique Gambit and also chairs the investment board of the Cardiff Capital Region. This article was researched and co-written with Isabella Hancock an economics and finance student at Reading University.