Chris Evans

18th March 2021


Four different types of acquisition in a post-COVID world

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?

Demand for acquisitions may be set to explode as companies battered by the pandemic look to consolidate and bring in new investment to shore up their finances. Others could look to complement their business with new skills and new market opportunities after their dependencies were exposed by the pandemic.

COVID-19 has given many companies a lens through which to reassess their stability and longevity. Companies have been forced to adapt to the rapid acceleration in technological change of the past 12 months, reassess how narrow their customer base really is and measure how vulnerable they are to both. Many are acting accordingly and buying another company remains the most cost-effective means of achieving their long-term goals.

With that in mind, market analysts Plimsoll have looked at four types of acquisition that reflect the mood in 2021, 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 particularly in green energy have a high proportion of companies with low financial strength, specifically in the wind and solar energy markets.

Unsurprisingly, Plimsoll noted that markets worst affected by restrictions 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 fanfare of the Brexit deal being signed bumps against the harsher reality of trade restrictions and friction for business, so the true costs are starting to show. Already we are seeing fresh produce rotting on quaysides and a 40.7% reduction in export trade with the EU. The UK government is even advising UK businesses they may need to set up operations on the continent to circumvent trade barriers that were once dismissed as “Project Fear”.

According to Plimsoll’s latest research, simply setting up an office or shell company in the 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 opportunity 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.

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?

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 shuttered over the past 12 months. They served a very narrow market with a very narrow product set. Once disruption hit, their business was left with little to no revenue. Those that survive the pandemic on the back of furlough and other government support need to ensure they are less vulnerable in future.

Diversifying into a new market is 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.

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 12 months 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 markets studies. Maritime Security Providers are growing 10 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 to 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?

Call 01642 626400 to contact us today.