Trade sales have accounted for nearly three-quarters (72%) of business ownership exit deals in Wales over the last 24 years, shows new research from Gambit Corporate Finance.
The Cardiff corporate finance boutique’s fifth survey of Welsh company exits also shows that of the 2,000 deals assessed between 2000 and 2023, around 80% of the acquired firms still remain active in Wales – dismissing the notion that change of ownership has a negative impact on the Welsh private sector.
Following trade sales the second most popular route for exiting shareholders was via management buyouts (MBOs) and management buy-ins (MBI) at 22%.
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During the period notable MBOs included the £87m acquisition of the Bluestone Resort in Pembrokeshire in 2013 and a £115m MBO of supermarket chain Iceland in 2020.
Gambit’s research shows there were just 31 flotations during the period, the largest of which involved now FTSE 100 car insurance to loans group Admiral Group 2004 for £386m followed by Bangor-based property development firm Watkins Jones in 2016 for £131m.
These listings on the London Stock Exchange and Alternative Investment Market accounted for just 2% of transfer options.
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More recent flotations of Welsh firms include Diurnal Group in 2016 for £25m, Brickability Group in 2019 for £57m and Facilities by ADF in 2022 for £18m.
Over the period there were seven de-listings with an average value of £44m including BBI Holdings in 2007, privatised by the US-based Inverness Medical Innovations for £73.5m and Frisbee Bidco’s acquisition of Finsbury Food Group in 2020,for £144m.
Gambit partner Frank Holmes said: “During 2000-2011, 55% of exits involved businesses that were less than 10 years old which dropped to 40% between 2012-2023. This was symptomatic of the lack of available liquidity during the deep recession and market uncertainty around Brexit. Whilst companies of all ages were exited throughout the period, 35% of businesses had existed for between ten to twenty five years.”
Gambit said that in 2023 the average age of shareholders exiting via a trade sale and MBOs/MBIs was 59. The age of shareholders at exit has been increasing over the past decade as economic uncertainty and availability of finance, has resulted in exits being delayed and inevitably shareholders getting older.
Gambit’s database includes transactions with undisclosed values and, where possible, market intelligence or in-house knowledge has been applied. The data has been adjusted to exclude non-indigenous companies, such as subsidiaries of overseas companies, as well as property transactions.
The manufacturing sector accounted for 31% of all exit deals. In terms of geography the research shows that on volume over the 24-years south east Wales accounted for 61% of total exits, followed by south west Wales with 21% and north Wales 18%. On larger transactions Mr Holmes said: “Deal values of over £100m, albeit limited in number, skew the 24 year trend analysis as 26 deals have a combined value of over £11.7bn. Most notably, the £3bn sale of Hyder assets and the and the recent £600m sale of Alcumus.”
The period between 2003-2007 were years of record economic growth globally and in Wales. This was reflected in the average consideration for disclosed deals between 2003-2007 reaching £10m. In the build up to the financial crisis deal, volumes and values were trending upwards, peaking in 2007 with 133 reported exits achieving a cumulative value of £748m. During the financial crisis and resulting downturn from 2008-2011, the average year-on-year fall in deal volumes was around 25%, while cumulative deal values fell year-on-year by around 50%.
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Business exits began to recover in 2015, with deal volumes returning to pre-crash levels in 2019, achieving a cumulative disclosed deal value of £333m as the 海角视频 left the EU.
Mr Holmes said: “The impact of Brexit was visible as cumulative disclosed deal values fell from £374m in 2017 to £179m in 2018.
“This was due to an increased volume of MBO/MBI exits while simultaneously higher value trade sale volumes fell.”
On the pandemic he added: “Covid-19 had a substantial impact on the economy from 2020 onwards, with 2020 seeing a 34% decrease in the number of deals compared with 2019. Despite the ongoing impact of the coronavirus, deal volumes increased by 93% in 2021, whilst cumulative disclosed deal values grew by 87%.
The economic fallout from Russia’s invasion of Ukraine was the major event in 2022 saw a negligible 1.5% fall in deal volumes compared with 2021, but with a further decline of 15% in 2023. However, overall deal values surged with a robust increase of 146% in 2022 and a further rise of 12.5% in 2023, as business valuations recovered.
On the outlook Mr Holmes said: “The Welsh private sector still has to overcome the challenges of leaving the EU, Covid-19 pandemic, the Russia-Ukraine War and, more recently, the Israel Gaza conflict.
“Against a backdrop of negligible economic growth, arguably stagnation, geopolitical conflict, exit deal activity has remained resilient in the last 4 years and is picking up due to buyers seeking growth by acquisition as opposed to organic investment.
“Overseas buyers and financial acquirers are the main protagonists and will increase activity levels and appetite as debt markets improve, despite a cautious outlook on business to consumer sectors.
An ageing ownership population fuels pent up demand for succession, but the key due diligence focus is on the underlying sustainability of financial performance in businesses whose owners are seeking to move out.”