It’s been an interesting year. Q1 was active with a steady flow of deals and then in Q2 activity virtually halted as we went into lockdown. Since then, PEMCF have seen a steady uptick, with both paused deals coming back to life and new transactions being initiated. Q3 and Q4 have seen several transactions closing and the latest data shows September deal volumes not that far below what we saw 12 months ago.
Activity is strong in both buyouts and company sales. We recently closed an MBO at a consulting firm operating in the pharmaceutical sector which was particularly attracted to our depth of experience in buyouts and our focus on knowledge-led businesses. And we’re currently working on several other buyouts targeted to close in the current tax year.
We give thanks to Rishi Sunak, as his aggressive shaking of the magic money tree to fund the Job Retention Scheme and other initiatives has stimulated speculation that the Capital Gains tax regime will be changed to help pay for it. Even with the changes to Entrepreneurs’ Relief to limit it financially, and give it a less snappy title, it remains as benign as its been for many years. Momentum is important in deal doing so this has been helpful. Buyouts are also popular as business owners see them as a relatively guaranteed way to get deals across the line in the short term, with banks and private equity houses remaining keen to fund them.
Company sales are also driving activity. We were lead advisers on the recent sale of healthcare software business MJog to Stockholm headquartered Kry. MJog is a patient messaging specialist providing a range of communications solutions such as digital app, SMS, email and voice messaging. It delivers tens of millions of messages every month, including appointment reminders, recalls and results reaching more than 40 million patients. We’ve also recently advised on the sale of a recruitment services business to a Spanish buyer.
Of course, the other side of the coin is that many growth minded businesses will be looking at acquisitions now. And it’s true that the current crisis is throwing up opportunities. The drivers of all this activity are sector, market liquidity, strategic intent of buyers, and tax, and it feels like they will continue to drive dealmaking in 2021.