Chris Evans

31st March 2022


Four different types of acquisition deals for 2022

Recent history has held a mirror up to many businesses large and small and in a broad spectrum of markets. The mirror has revealed weaknesses in many business models. Paradoxically, it has also revealed unprecedented opportunities and a one-off chance to reset corporate goals.

COVID-19, Brexit, Ukraine, cost crises, supply chain issues and many other external issues have forced many to reassess their business’ stability and longevity. These macroeconomic factors have brought forwards decades worth of technological change and evolution in customers/market habits. Three years ago did anyone foretell the move to hybrid working and the other changes in how we live our lives?

The pace of change brings new opportunities but it also shakes the core foundations of many businesses. Companies that previously serviced relatively narrow customer bases are forced to expand into new markets. Businesses that have seen supplies become increasingly scarce are looking for ways to make deals further up the supply chain. New innovations are exposing knowledge gaps in even long-established businesses.

In 2022 and beyond, companies are looking to bring in new expertise, pivot to new markets, develop innovative, new products and intellectual property or secure their supplies amidst hot competition. In all of these cases, buying another company is the most cost-effective and efficient means to achieve your strategic goals.

While demand will be driven by innovators looking to “future proof” their business, others, battered by the pandemic, could look to bring in new investment to shore up their finances after the past 2 years. As a result, a sustained period of consolidation across almost all sectors of the economy.

Market analysts Plimsoll have looked at four types of acquisition that look to be most prevalent in 2022, why companies could be looking to make them and what they need to be aware of:

Buying in market share at rock bottom prices

Companies are itching to get back to growth. Stakeholders expect it and shareholders demand it. The easiest way to grow in your established market could be to acquire a distressed competitor, instantly adding to the size and status of your business.

According to Plimsoll’s latest market research, certain industries around capital intensive sectors have a high proportion of companies with low financial strength. That appears particularly so in the wind and solar energy markets. Could the trouble in Eastern Europe and the need to move away from fossil fuels further drive an M&A boom in the sector?

Unsurprisingly, Plimsoll noted that markets worst affected by COVID-19 lockdowns such as retail park operators, theme parks, hotels and trampoline centres all have a high proportion of distressed companies. These markets could be set for significant consolidation as stronger companies buy up distressed rivals.

A post-Brexit acquisition

As the reality of Britain’s trading relations with the EU, and the rest of the world becomes increasingly clear, so the impact is being absorbed. The debacle that saw 800 British jobs lost at P&O while EU based roles remain untouched. The damage is done to whole sectors from food and farming to manufacturing. Companies must look increasingly to acquire export expertise or even buy into EU markets to negate the issues, with even the UK government advising businesses to set up EU operations to circumvent new trade barriers that were once dismissed as “Project Fear”.

According to Plimsoll’s latest research, simply setting up an office or shell company in a single market is missing a huge opportunity. Acquiring an established company in an EU country could allow you to grow your business and reduce your reliance on a narrow domestic market

There is a wealth of M&A opportunities across the continent for companies looking to invest. Within large economies such as France, Germany and Italy, energy, financial services and chemical sectors have a high proportion of companies most likely to be open to a deal. As those respective sectors increasingly grapple with geopolitical uncertainty, could now be a good time to make a deal?

In the smaller, emerging markets of the EU, Ireland, Latvia, Hungary and Portugal have a higher percentage of distressed purchase opportunities. For UK companies in a post-Brexit world, could buying an Irish company be the passport to continued single market access, especially with the Withdrawal Agreement still causing such uncertainty on the island?

Plimsoll can help you search across a variety of criteria including markets, company size, region and much more to give you an almost instant list of potential options.

 A diversification purchase

So many companies have seen their core markets fundamentally altered over the past two years, especially those that serve narrow markets with specific product sets. Once the pandemic hit, those businesses were left with little to no revenue. Those that survived the pandemic need to ensure they fix those dependencies now.

Diversifying into a new market can be daunting. Unless you have the deep pockets of major conglomerates, you are setting up in a new market where established players know more about the product/service and its audience. With that in mind, why not just buy an established company, with an established customer base, if you are looking at new markets?

In the UK, Plimsoll has identified several high growth sectors that those looking to diversify might want to consider. Software is a sector continuing its rapid expansion as cloud-based, online solutions infiltrate and disrupt more and more markets. Niche, specialist software providers covering H&S, Compliance, Energy and Recruitment are all enjoying exceedingly high growth.

Elsewhere, alternative fuel and energy including Biomass and Ground Source Heat are enjoying strong growth. Could the move away from Russian gas lead to further consolidation?

 The challenge is to find a market broadly aligned with your competencies and culture, that is growing enough to make it worthwhile, and the best targets in that market that meet your criteria. Plimsoll can help you to build a list of the best opportunities in just minutes.

Securing part of your supply chain

COVID-19 has also seen supply chains closed as restrictions shut down markets and businesses. In addition, Brexit is making supply chain management, particularly for those of a JIT nature, ever more complex and expensive. With those twin challenges in mind, hasn’t the last two years demonstrated the benefit of bringing more of your supply chain under your control?

Buying a company up or down your supply chain has several benefits. It reduces your dependency on a narrow market by potentially opening new growth opportunities. It also reduces downtime and price pressures as part of your supply chain becomes integrated into one organisation.

There are many industries where buying within the supply chain would have enormous benefits to an acquirer, according to Plimsoll’s latest market studies. Maritime Security Providers are growing ten times faster than the shipping and freight companies they serve. Elsewhere, Climbing Centre operators continue to struggle as the country remains under lockdown, but Climbing Equipment Manufacturers are among the UK’s fastest-growing companies.

In both these examples, acquiring into these support markets could provide new growth and stability to a buyer. Plimsoll has identified hundreds of examples just like the ones highlighted here.

Plimsoll specialises in reducing the search and identification process for finding acquisition targets from months to mere minutes. We offer a range of services and products that are designed to help business leaders quickly narrow millions of potential options in varied markets, sectors and even countries into the handful that you could realistically consider.

We have thousands of industry-specific studies to let you filter down the companies that meet your criteria or we have our Acquisition Finder Service whereby we do all the hard work and present you with the 10-20 best possible targets. Whatever stage you are at in your M&A journey, why not have a no-obligation chat with one of our specialists and discover how to stop wasting time and money?

For more information about Plimsoll and the various solutions we offer to help you to find the best acquisition prospects, please click here.