Last year was busy – What does next year have in store?

It’s been a long time since I posted here. 

It’s been a busy year and we’ve been busy advising on some interesting transactions.  Here are some of the highlights

Sale of Young Calibration to NMi Certain BV. 

Another sale to an overseas buyer.    Young Calibration is based on the South coast near Brighton.  And this was a first for me in that the whole transaction was conducted virtually.   I’ve done deals substantially virtually, but in this case right from first meeting with the selling shareholder Adrian Young to the complete everything took place in Teams or Zoom.     Young Calibration has UKAS accredited labs and industry leading knowledge and experience in thermal fluid systems testing, cleaning and development. It works with a wide spectrum of industry sectors including automotive, aviation, medical, environmental, and pharmaceuticals.  The deal is strategic for NMi and should allow the companies to capitalise on opportunities in electric vehicles charging, and respond to new regulations in automotive and motorsport sectors.

MBO of Titan

Titan is a St Neots based engineering company.  It began in motorsport racing and having changed and broadened over the years is now at the forefront of manufacturing complex steering technologies for advanced vehicles.  This was an MBO lead by an experienced team who bought the business from its private shareholders.  These shareholders had had the foresight to bring in a professional management team to develop and grow the business, and it’s great to see that coming to fruition in a good exit for them, and a great opportunity for CEO George Lendrum and his team to continue to grow the business.

Sale of Cambridge Bioscience and Research Donors to Nordic BioSite Group


This deal sees three European life science distribution businesses coming together.  NMI’s plans to assemble a pan-European life science research distributor took a big step forward with thee acquisitor  gives them an entre into the market for high quality bio specimens.    Another international deal, and another conducted virtually.  I have at least met Mike Kerins the CEO since the deal was done over a glass of Champagne.

Sale of X-On to SOuthern Communications Group

Last but not least, completing within a couple of weeks of our firm’s financial year end we advised on the sale of X-On a cloud telephony business focussed on the UK primary care sector.   Approximately 11 million GP patients in the UK are now served by 1,400 GP practices using X-On’s Surgery Connect.  This is about 17.5% of the telephony market in primary care.   X-On was sold to Southern Communications Group and it should allow X-On to further capitalise on demand for its market leading product.   Again, a deal conducted largely virtually, but I had met CEO Paul Bensley and his co-Director Paul Heeren before the process kicked off.


What themes can one draw out from the last year.  Increased digitisaion of deal doing – which is oiling the wheels.  And that there’s plenty of activity still.  That strategic buyers and PE funds are still very active and there’s plenty of liquidity in the market.  From what I can see so far, it’s continuing into 2022/2023

What does the crystal ball say about M&A in 2022 going into 2023

This last section is an edited version of an article I wrote for Business in East Anglia

Crystal ball
Deal volume has held up well despite Brexit, and even global pandemic.  So how about the dual impacts of war and inflation?  Maybe better than you’d expect.   A recent Deloitte survey (admittedly done before Putin’s tanks started moving) found that 92% of businesses expected deal volume to increase.   Many owner managers are ready to sell because their businesses are doing well and yet after some difficult years they now feel they’d rather do something else and buyers are paying good prices as they have the means and the motive.

Here’s some 5 drivers of activity we’d expect to see:

  1. The private equity sector has record levels of cash which needs spending. This is driving activity and supporting prices, whether PE funds are buying directly or supporting their existing portfolio to buy.  I don’t see this lessening, and with the turmoil in the quoted market, and lack of returns to be made elsewhere I can see investors continuing to pile into Private Equity as an asset category.
  2. Deal making digitisation is increasing as the examples above show. This allows us to be more agile and to reach further from base to advise businesses – so if whether you’re based in Cornwall or Caithness I'd love to hear from you!
  3. Cross Border M&A is a strong driver with well funded overseas buyers finding the UK an attractive place to do business. As illustrated by the Cambridge Bioscience and Young Calibration deals above.
  4. The war for talent there’s been much talk about “the great resignation”, and we’re already seeing deals being done where the acquisition of a good team is the main driver. Expect to see more acquihires – acquisitions driven primarily by the desire to get hold of a team of people - particularly of knowledge led businesses such as consultants, agencies, and professional firms.
  5. Hot spot sectors driving activity - Tech deals remain buoyant– COVID led to an acceleration of the transformation of many areas of commerce to harness cloud based technologies. Healthcare also a hot spot, our recent deals underscore this trend.   We’re also seeing a lot of activity in Fintech particularly around London.


Company valuation is an art?

We think its more of an art than a science.    And this is borne out by legal precedent:

"in the field of valuation the experience of the valuer and his ability to form a sound commercial judgement is of overiding importance. The process of valuation cannot be reduced to the application of a set of abstract formulae..."

Justice Vinelott - High Court Case Re Cumana (1986)

I lead our business valuations activity, and as such I often get to see earlier attempts at valuing the company, or sometimes in a dispute the valuation prepared for the other side.  I'm always astonished at home little knowledge is shown of the business being valued.    Its like a surveyor valuing a house simply by driving past it at speed.   And companies are more complex to value.   I've also seen valuations where earnings multiples are simply plucked from the air, or derived from quite ludicrous comparatives.   And probably the worse offenders are the valuations that clearly suffer from "death by spreadsheet".  In other words lots of complicated, but meaningless, analysis.

We believe strongly that valuation reports should be useful, and if possible interesting to the company that commissions them.

If you're interested in learning a little about the factors that will influence the value of your business, why not come to one of our seminars where we cover the topic.  We're runing one in Norwich this week 14 March at Dunston Hall Hotel.   We're running them again in Cambridge at the Trinity Centre on 13 June, and in Borehamwood at the Holiday Inn on 20 June.  If you'd like to find out more about the program or to book visit our events page

The C-word and 7 Other Words to Avoid at Work

I-DONT-WORK-HERE-IM-A-CONSULTANT_87The majority of businesses in the U.K. started out as service companies.

If you want to own a web design firm, you don’t need a lot of money, just a technical knack. Enterprising professionals who know how to get the media’s attention can start their own pubic relations firms without much more than a mobile phone. No capital required.

But if you want to build a valuable company – one you can sell – you’ll want to stop presenting yourself as a service firm. Consultancies are not usually valuable businesses, because acquirers generally view them as a collection of people who peddle their time on a hamster wheel. The typical way to sell a consultancy is for the consultants themselves to trade their equity for a job, in the form of an earn-out that may or may not have an upside. 

Consider re-positioning your company out of the ‘consultancy’ box.  Depending on your business, you may need to change your business model and ‘productise’ your service. One of the first things to do is to stop using consulting company terminology and replace it with the terminology of a valuable business:


Defining your company as a ‘consultancy’ will announce to the market you are a collection of people who have banded together around an area of expertise. Consultancies rarely get acquired, and when they do, it is usually with an earn-out. Replace ‘consultancy’ with ‘business’ or ‘company’.


An engagement is something that happens before two people get married; therefore, using the word in a business context reinforces the people-dependent nature of your company. Replace the word ‘engagement’ with ‘contract’, and you’ll sound a lot more like a business with some lasting


A deck is a place to have a glass of wine on. It’s not a word to use to describe a PowerPoint presentation unless you want to look like a ‘consultancy’.


Instead of describing yourself using the vague term ‘consultant’, describe what you consult on. If you are a search engine optimization consultant, who has developed a methodology for improving a
website’s natural search performance, say you ‘run an SEO company’ or ‘help companies improve their ranking on search engines, such as Google’.


Consultants promise ‘deliverables’. The rest of the world guarantees the features and benefits of their product or service.

Associate, engagement manager, partner

If you refer to your employees with the telltale labels of a consultancy, consider replacing ‘associate’, ‘engagement manager’ and ‘partner’ with titles like ‘manager’,” ‘director’ and ‘vice-president’, and  you’ll reduce the chance of your customers expecting a bill calculated at 10-minute increments.


 The word ‘client’ implies a sense of hierarchy in which service providers serve at the pleasure of their client. Companies with ‘clients’ are usually prepared to do just about anything to serve their clients’ needs, which sounds great to clients, but also telegraphs to outsiders that you customise your work to a point where you have no leverage or scalability in your business model. Would your ‘clients’ really care if you started referring to them as ‘customers’?

It’s easy to get stuck in a low-growth consulting company. ‘Clients’ expect to deal with a ‘partner’ on their ‘engagements’, so the business stalls when the partners run out of time to sell. If a company ever
decides it wants to buy your consultancy, acquirers will know they have to tie up the partners on an earn-out, to transfer any of the value. When it comes to the value of your business, optics matter and the first step in avoiding the consulting company valuation discount is to stop using the lingo.

The Cambridge Perspective

This is all very relevant in the Cambridge technology market.  We see many local tech firms
which are essentially consultancy based, and the holy grail for most of these guys is to create a product line.   Why?  Put simply because having a product along with the IP (tech and possibily brand related) builds value in the company beyond the relatively lower value of consultancy income.   There is plenty of precedent around here for consultants spinning off successful product companies.   A high profile example would be Cambridge Silicon Radio (CSR) which span out of Cambridge Consultants.   An example of a consulting business generating product and IP to build value would be local Inkjet specialist Xennia - we advised on the sale of Xennia to Dutch plc Tencate.








Planning to Sell? How to answer THE most important question

Many business owners believe the act of selling their business is similar to passing the baton in a 400 metre relay: once you’re finished running, you get to relax.  In reality, buyers will insist that you stay on for a transition period – anywhere from six months to five years – during which time you continue to work in your business to help the buyer capitalise on the investment they’re making.

Question-markTHE Question 

At some point in the process of selling your business, a prospective buyer will ask you – usually quite casually – “Why do you want to sell your business?” These eight seemingly innocuous words have derailed more deals than any others.    As advisers we often get asked this one about businesses we are selling, but you can be sure that the buyer will look you in the eye and ask it when you get to meet them.

Buyers ask THE question to evaluate how likely and willing you are to stay on or if you already have one foot out the door.

Obviously you don’t want to lie, but there is a right and wrong way to answer THE question. Answers like “I want to slow down a bit” or “I want to travel” or “we’ve got a baby on the way and I want to spend more time at home” communicate to a potential buyer that you plan on winding down when they take over. However, what they want to hear is your intention to help them realise the potential locked inside your business.

Here are some suggested responses based on your age.

If you’re under 40, you clearly aren’t ready to “retire” so you need to communicate that you see an upside in merging your business with theirs:  “In order for us to get to the next level, we
need to find a partner with more <insert sales people, distribution, geographic reach, capital or whatever the partner brings to the table>.”

If you’re between 40-55 years old, most people will understand the need to shore up your personal balance sheet:   “I’ve reached a time in my life where I want to create some liquidity from the value I’ve created so far, and at the same time I want to find a partner who can help us get to the next level.”

If you’re over 55, you can start to talk about retirement, but you want to make sure you communicate that you still have lots of energy and passion for your business.  “I’m at a stage where I need to start thinking about retirement. It’s a long way off yet, but I want to be proactive.”

Rehearse your answer to THE question so it becomes a natural response when you are inevitably asked THE question by a potential buyer.   Your honest, if rehearsed, answer delivered face to face will be powerful and convincing.

Planning to sell your company this year, or just grooming for a later sale? Thinking about a retirement and considering sellling to your management team. In any event I guess you'd rather pay as little of the proceeds in tax as possible. We are once again running our Business Exit Strategy Seminars which cover these topics and more in a lively informative way. "A morning well spent...." is a typical quote from a previous attendee. The event is running in Peterborough and Norwich over the next few weeks, then in Cambridge and London in June. Full program and booking details on events page.

Sale of Suffolk based Payday Lender

We finished 2010 with a completion on 29th December with the sale of Fortress Group (UK) Ltd to Texas based Think  Finance Inc . 

Office picture Fortress, which is based in Bury St Edmunds, was founded in 2007 and has grown rapidly  to become a leading UK payday lending business.   It's an entirely online businses trading as "1 Month Loan" and "Mayday Payday".  

Think Finance is one of the US's fastest growing private companies with three year revenue growth of over 70%.  It is privately held and backed by some of Silicon valley's most respected venture capital firms, including Seqoia Capital and Technology Crossover Partners. 

Think will provide capital to accelearate Fortress's expansion - Kieran Moulden, CEO of Fortress said that as a result of the new funding the company aimed to increase its business ten-fold.

Iphonemockup1 We were pleased to work with Kieran and his co-director Stuart Carter over the last year to prepare the company for sale and to market the company internationally.    They have achieved a huge amount in building Fortress to such a strong position in a short period of time.

This is a market which is developing rapidly in the UK.   In contrast it is a mature market in the United States with allegedly more payday lending outlets than branches of McDonalds.   This is not the only US acquiror active in the UK - NASDAQ quoted Dollar Financial Corp is to acquire Purpose UK Holdings the largest UK payday lender for £124M

Entrepreneur's Relief

In a welcome bit of support for owners of business and for company sales the Chancellor extended Entrepreneur's relief in the budget last week.   This effectively means that those selling their business will pay only 10% capital gains tax on the first £2M of gains compared with £1M of gains under the initial version of the relief.    PF-budget-box_1214536cThis relief is a lifetime limit per shareholder.   So for example in a business with three shareholders up to £6M of gain may benefit provided each hold >5% of the ordinary shares and that all are offices of employees of the company.  So in that example there is £240k less tax to be paid :-)

As ever there is some more small print - but that's basically it. 

Less wellknown is that assets in use for the purpose of the businses also benefit.   So the entrepreneur who sells a business at a £1M capital gain, and alongside this sells a property used f or the purpose of the business for a further £1M gain - can enjoy the effective 10% CGT rate on both transactions.

So with some recovery in the market - see earlier post on Guarded Optimism - and the propsect of paying less tax its a better time to sell your company than its been for the last 18 months or so.

Time to come out of hibernation?

Last year was a difficult year for M&A worldwide – with many advisers downsizing significantly and going into “hibernation”.  Thomson Reuters reported European M&A down 65% from the peak.  Meanwhile, in a sign of the times, Mergermarket reported a 370% increase in insolvency deals to a level just short of the quantum done over the previous four years.

So is it time to come out of hibernation?  What is this year going to be like?  The government tell us we have come out of recession.  But then in a recent Harris poll just 10% of people said they believed government figures.  So who to believe?

At a local level in East Anglia we are already seeing some signs of life in the market.  PEM Corporate Finance has recently completed two transactions – the acquisition of ISIS Fertility by Bourn Hall and the acquisition of Elmy Landscapes by Flora-tec.

The acquisition of Colchester based ISIS gives Cambridge based Bourn Hall greater ability to provide its world class fertility treatment services to patients in Essex and Suffolk.  Cambridge based Flora-tec’s acquisition of Ipswich based Elmy gives it greater coverage in Suffolk and the east of the region.  It also gives it the ability to leverage Elmy’s particular expertise in the maintenance of school and sports-grounds.  Interestingly both Bourn Hall and Flora-tec were management buyouts and are making their first acquisitions post buyout.  These are excellent growth opportunities for our clients, and show that there are deals to be done where there is a good strategic fit.  Since completing these transactions we have seen a pronounced upturn in new instructions and enquiries.

This upturn is being driven by some recovery in the multiples being paid for businesses, slightly better liquidity available from the banks, and above all by a gradual return of confidence.   But despite increased confidence entrepreneurs feel it will be a slow upturn.  A recent Bowmark Capital survey found that just 14% foresaw recovery in the first half of 2010, 45% in the second half of this year, and 26% felt it would take until the first half of 2011.

One symptom of the recession last year was the very slow pace at which transactions progressed.  Now, for those able to do a quick deal, the prospect of realising value before a change of government and a much predicted change in the tax regime, is putting some welcome pace behind transactions.

Another feature of the coming year will probably be a greater proportion of trade buyers to private equity buyers than of late.  Trade buyers making strategic acquisitions should benefit from operational synergies.  However Private Equity buyers will neither benefit from synergies nor be able to raise the high level of bank debt that used to allow them to leverage their deals.

Technology deals have been hit during recession, with one commentator reporting the North American market at a 15 year low.  The same commentator now forecasts a doubling of activity in 2010.  Pricing is improving in the tech market too – Regent Associates report a steady increase in multiples paid for technology business since Q2 of 2009.  This was probably the low point due to the high level of distressed sales then being conducted at knock down prices.

So overall the picture is more positive than it was.  But one should be cautious about forecasting.  As American economist Paul Samuelson said, “the stock market has forecast nine of the last five recessions”.  Just as dangerous to be over optimistic – but increasing confidence should be self fulfilling provided there are no more shocks to the system.  

Selling your business - who writes the Information Memorandum?

I have been reading "Local Heros" a book by David Erdal about the employee buyout of theLoch Fyne Oysterbusiness.    I was interested in this book because I drive past the original Loch Fyne Oyster business near Inverary at least a couple of times each year on my way to Oban.   Also because I like the restaurants. 

At one point Erdal describes how, following the death of one of the founders the business was to be marketed for sale.    Of course when selling your business you need a decent document to describe it and present it in the best light.    Erdal reports that the team were surprised how much of there input was required to the document given that they had appointed an Edinburgh firm of corporate finance advisers to help advise on the sale of the company.  

Local heros I was interested in this comment, as it is a reaction I have often come across.   Folk do sometimes expect the adviser to produce a slick document after being given a few random documents.  

 In reality the best sales documents (or information memorandums)  are produced by advisers and management working as a team.  Only the directors can produce the core material to describe the business, however the advisers can work on it to bring out the best points of the business, and to fulfill a vital copy writing and editorial role.    I am often surprised how people underrate some features of their businesses - simply due to over familiarity. 

The lesson is that its important for both parties to understand their roles at the outset.