Spring update: The latest developments in the M&A market.

Signs of resilience despite wider uncertainty

Uncertainty continues to be one of the key words when it comes to assessing the M&A market as we enter the new tax year.

Economically, despite gloomy headlines, there have been some encouraging signs – inflation has fallen, and interest rates have remained steady with further cuts expected. But in April we also had some of the tax rises announced in the Autumn Budget finally come into effect for businesses, while the global economic picture was dominated by Trump’s trade tariffs and the market’s reaction to them.

The ever-evolving nature of the proposed tariffs undoubtedly makes this a more challenging moment to complete deals, with some choosing to defer their M&A plans, but notably we aren’t seeing a significant drop in activity. In fact, there are many that are still wanting to push ahead as it becomes increasingly more difficult to predict what the future may have in store – uncertainty, it seems, has become normalised.

Private Equity firms have a wealth of capital that they are looking to deploy, and we are seeing a real flight to quality as they look for safer investments in the current environment. This is partially driving an increased emphasis on due diligence as investors seek more assurance before deploying their funds, putting a greater emphasis on detailed planning for those looking to achieve a successful transaction.

Sectors like tech continue to enjoy strong levels of activity, as their consistent performance makes them a safer bet for investors. Meanwhile any firms with contracted revenues which provide clear future earnings, including areas like testing, inspection and control, are also still attracting high levels of interest.

But while M&A appetite remains robust, some businesses, especially smaller family-owned firms, who are reflecting on their plans and whether traditional exit routes are right for them.

Family affairs

Family-owned and owner-managed firms have been among those most impacted by the recent increases to national insurance contributions. Combined with recent changes to both inheritance and Capital Gains Tax (CGT), this is causing many to re-evaluate their aims for the future, especially when it comes to succession planning.

One notable trend we are seeing in this area is the rising popularity of Employee Ownership Trusts (EOTs). A few years ago, this would have only been a secondary consideration for firms but is now becoming a viable option for those looking to sell their business to the next generation.

One of the many advantages of these Trusts is that they are exempt from CGT. In addition, EOTs can create a greater buy-in from employees by giving them more of a voice, helping to preserve the culture and legacy of a business. Increasingly, we’re seeing that, where owners are willing to adopt a long-term patient approach, a properly structured EOT can in fact deliver as much value as a typical PE or trade deal if that longer-term view is adopted.

For those considering more traditional exits , demand remains resilient. As always, the key is planning. Business owners must ensure their house is in order before pursuing an exit, which is why it’s crucial to engage with professional advisers as early as possible.

Personal aspect of dealmaking

When it comes to advising businesses, one aspect that is less typically discussed is the personal impact the deal process can have on an owner. For family firms, the people involved will have poured a lot of time and effort into developing the business, often making it  the major driving component  of their lives. Most of these family owners will also go through the M&A process only once  and often will feel a sense of obligation to their employees, wanting to also secure a safe future for them under the new business owner.

This means that as advisers, we need to be able to quickly build empathy with those we’re working with, to help navigate this often-overlooked human side of the process. To achieve this, it’s about building an honest and transparent relationship with our clients.

Open and effective communication is a must to create this sense of trust, especially in times of uncertainty. In the current climate, deals can only be successful if clients have faith in us as advisers to secure a positive outcome and for us to explore all the possible options as sale processes are more fluid than ever at the moment.