Could the global market turmoil impact South West M&A deals?

Will a possible Brexit, the slowdown in China, and a tumbling oil price have an impact on the deals market in the South West?

Recent research by Experian revealed that a total of 535 deals were completed in the region last year - an increase of 15.3 per cent on the previous 12 months. If the trend continues then the South West could expect to see even more deals completed in 2016.

John Panteli, a partner at Grant Thornton, believes that because of the strength and diversity of mid-market corporates in the South West we shouldn’t necessarily see the  uncertainty surrounding the UK’s membership of the EU and the marked slowdown in China  acting as a significant brake when it comes to South West M&A deals.

He said: “If you look at the pattern of activity here in the region since 2010 then there should be plenty of reasons for optimism. There has been a steady increase in deal flow as we move out of the recent recession. And although there can be no ignoring the fact that there is major uncertainty on stock markets across the world a strong community of dynamic, entrepreneurial businesses as we have in the South West creates a vibrant corporate landscape.”

He believes the slowdown in China and problems of various markets could impact the South West’s larger listed firms but variety and the appetite to drive growth across the mid-market puts the local economy in a strong position to weather the storm.

“The listed corporations are more sensitive to the prevalent market conditions, and this can impact investor confidence too,” he said. “Chief Executives and Chief Financial Officers of those businesses will need to invest time building investor confidence and will need to ensure that doesn't distract from pursuing their growth strategies, as can be the case during times of market uncertainty.

“That said the mid-market deal environment, including corporate acquisitions, Private Equity and the AIM market, tend to be more resilient to global factors. The appetite to get deals done is driven much more by personal factors, such as succession issues and aging shareholders and growth aspirations as well as the need for funding to realise those plans.   Certain sectors will fare better than others as they come into favour and the mid-market is also where we see more disruptive products and innovation. Fortunately, here in the South West we are particularly strong when it comes to these type and size of businesses.”

The latest ICAEW/Grant Thornton Business Confidence Monitor indicated that business confidence dipped slightly in the region in the final quarter 2015, while turnovers continued to grow at a faster rate.

John believes an active M&A market is a vital part of a healthy and thriving economy but businesses should always take a considered approach when it comes to buying or selling.

He said: “For any economy to grow and develop you need to have strong and vibrant businesses which are looking to exploit new markets, expand into new areas and grow their customer base. This in turn will create new jobs and bring more wealth into the economy.

“Companies can expand through organic growth but more often than not growth comes about as a result of acquisitions. A strong local economy needs a strong market to stimulate and encourage sustained growth.

“The South West economy is a vibrant one and hopefully we are now entering a cycle of sustained growth. It remains to be seen what impact the international situation has on the region in the long term.”