Conversely, every privately owned building products supplier I speak to is extremely positive about their current numbers, and whilst they have an uneasy knot in their stomach brought on by the potential impacts of Brexit in 2017, most are looking at positive order books and customer dialogue.
However, all the news from the major distributors is negative, Wolseley’s announcement of a restructuring of its UK business and Travis Perkins announcing branch closures. Maybe the bad news has not yet reached the more agile SME sector?
Deal volumes
played out in the M&A market since the EU referendum. Deal volumes 2016 and H2 of 2015, with
very limited activity from the major corporates in the sector and no deals of have seen trade buyers, they have generally been overseas acquirers who have been in conversation with mid-sized target businesses for some considerable time, such as ASSA ABLOY buying Trojan and Wilsonart acquiring Bushboard.
Private funding In contrast, UK private equity has been to the fore funding deals for Westleigh Homes, Brickability, Polyframe, Campion Homes, Horbury Group and PAW Structures. This disparity between the behaviour of trade and private equity is not untypical in times of uncertainty as larger trade, particularly listed plcs, seek to call the market early, driven by the quarterly reporting culture. Private equity, on the other hand,
can take a longer term view as long as the deal is priced and structured prudently. This caveat of deal pricing and structuring has meant a number of proposed deals have been pulled or, worse still, remain in the market and, in reality, past their sell by date.
Looking ahead, a few of these hangover deals, properly advised, should supported by the continuing positive fundamentals and recently announced government infrastructure and housing supply side initiatives.
Better investment Indeed, given these factors, plus the possibility of continued positive economic performance and the UK, even with Brexit, looking a better place to invest than most of our erstwhile European partners, means we could see a much stronger M&A
market from the end of Q1 onwards. Even more positively, stronger, in this context, will mean higher valuations rather than higher volumes as buyers and funders who are still awash with cash will prefer to pay up for quality opportunities in a still uncertain environment. Therefore, shareholders and management teams keen to achieve a transaction in the next couple of years option than 2018 as the UK approaches the actual Brexit date.
Helpfully, we will get a fairly early signal early in 2017 of which way the wind is blowing in the M&A market via the outcome of the currently well-publicised MKM.
If an extremely well informed buyer/funder decides to place a big bet on the sector, then others could well follow suit.
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BMJ January 2017 Deliveri liverin tably
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