Shocked at the current value of your EV? How rising interest rates and economic recalibration are reshaping the value of capital assets — and what it means for businesses and investors.

As we move through 2024, small and medium-sized enterprises in the UK are experiencing a cautiously optimistic recovery. The lingering effects of the pandemic, coupled with recent inflationary pressures, have significantly impacted both the demand and supply of finance. However, recent data from the Business Finance Review Q2 2024 reveals a gradual improvement in lending trends, providing a sense of optimism for businesses looking to grow. Despite these improvements, challenges remain, and understanding the current financial landscape is key for SMEs seeking to secure the right finance.

In the ever-evolving world of corporate finance, structuring deals that foster business growth while maintaining financial stability is paramount. Recently, our team at Branta had the privilege of working on a significant project under the new Growth Guarantee Scheme, which showcases the strategic approaches we employ to support our clients' ambitious growth plans.

Welcome to Branta’s dive into the UK Mergers and Acquisitions (M&A) market, focusing on the latest insights available from the data in May 2024. This comprehensive review provides a clear snapshot of recent deal volumes, values, and valuation multiples, helping UK SME business owners navigate the ever-changing M&A landscape. The data is kindly provided by MarkToMarket . Market Overview Deal Volumes: A Mixed Bag May 2024 saw a decrease in the number of deals compared to the same period last year. While this might initially seem like a negative trend, it’s essential to consider the broader context. The M&A market is inherently cyclical, and various external factors, including economic conditions and political changes, can impact deal flow. May 2023 vs. May 2024 The data shows a decline in completed deals, with 385 transactions in May 2023 compared to 366 in May 2024. This 5% reduction in deal volume can be attributed to several key factors: Political Uncertainty The 4th July general election created a sense of uncertainty within the market. Businesses often hesitate to engage in significant financial transactions during periods of political instability, awaiting the election outcome which could impact economic policies and regulations. Longer Completion Times The average time to complete corporate finance transactions has increased to an estimated 13 months. This extended timeline delays the finalisation of deals, contributing to the apparent reduction in monthly deal volumes. Factors we know of that are slowing transactions include: buyers undertake longing periods of due diligence mainly around the seller proving their numbers in the management information against forecast, and restricted availability of credit. Economic Factors Broader economic conditions, including inflationary pressures and changes in interest rates, have also played a role in slowing down the pace of M&A activities. Valuation Multiples Valuation multiples are crucial for understanding how businesses are valued in the market. The report provides insights into both revenue and earnings multiples, offering a clear picture of the valuation landscape. Average Multiples For May 2024, the mean revenue multiple was 2.95x, while the mean earnings (EBITDA) multiple stood at 15.17x. These figures are derived from a mix of UK and international deals, reflecting diverse industry valuations. It's essential to note that these multiples are heavily skewed by certain outlying deals, particularly those involving large, high-profile companies or sectors that attract high valuations such as SAAS businesses. For a more typical SME, the earnings (EBITDA) multiple is generally lower. On average, SMEs in the UK might expect to sell for an EBITDA multiple ranging from 4x to 6x, depending on the industry and specific business characteristics. Deal Size Analysis The average deal sizes reported in May 2024 highlight significant activity in the market, but it is crucial to understand how these figures are influenced by large, high-value transactions. Mean and Median Deal Sizes The mean deal size for May 2024 was £1.1 billion, while the median deal size was £170.4 million. This significant difference underlines the impact of large outliers on the overall statistics. For our readership of smaller SME companies, it's important to recognise that these averages are heavily skewed by substantial deals involving listed and international companies. These large transactions can distort the perceived market conditions for smaller businesses. However, smaller deals are still very active within the broader M&A landscape. Strategic Implications for SMEs For UK SMEs considering M&A activities, the insights from this analysis can guide strategic decision-making: Market Positioning Understanding current valuation trends can help businesses position themselves more effectively for potential acquisitions or sales. Sector-Specific Insights With detailed breakdowns of deals by sector, SMEs can benchmark themselves against industry standards, identifying opportunities for growth, consolidation, or owners realising value. Conclusion The May 2024 insights into the UK M&A market highlight key trends, significant transactions, and valuation metrics. For SME business owners, these insights can inform strategic decisions, from growth initiatives to potential exits. Staying informed about market dynamics is crucial for navigating the complex landscape of mergers and acquisitions. Self-Test Questions Here are some issues to ask yourself or debate with your wider team: How might current political and economic uncertainties affect your business's readiness for a merger or acquisition? What is the typical timeline for your business to complete significant financial transactions, and how does this compare to the broader market trend of 13 months? Are there opportunities within your sector that align with the current valuation multiples for revenue and earnings? Considering the average EBITDA multiple for SMEs, how does your business's valuation compare, and what factors could enhance its attractiveness to potential buyers? Are you considering a merger or acquisition? Contact Branta today for expert advice on navigating the M&A landscape. Our experienced consultants are here to help you achieve your business goals.

We are pleased to announce the successful sale of Tickitape, a leading company in the adhesive tapes industry. Tickitape specialises in the production and distribution of high-quality adhesive tape products used across various industries, including packaging, construction, and automotive. This transaction demonstrates Branta’s commitment to delivering exceptional corporate finance advice and achieving significant results for our clients, particularly those planning to transition into retirement.

As we traverse the first quarter of 2024, the UK's small and medium enterprise (SME) sector continues to evolve, presenting unique challenges and opportunities for business owners looking to sell. This analysis seeks to provide a clear view of the current trends affecting business sales, offering insights that are crucial for making informed decisions.

In the bustling world of small businesses, where innovation can be hampered by financial hiccups, Branta stands as a beacon of hope. Our recent collaboration with The Homemade Brownie Company, a UK-based artisanal brownie maker, illustrates a scenario where determination meets opportunity head-on, resulting in sweet success.

If you own a small or medium-sized business and have ever applied for a loan or credit facility, you may have come across the term "personal guarantee." Simply put, it's a legal contract between the lender and the borrower that states that one or more individuals will act as a guarantor for the loan, should the business be unable to repay it. In this blog post, we'll explore what personal guarantees are, why lenders require them, and how you can deal with them to protect yourself and your business.

It's an open secret that the construction industry is currently going through a challenging period. This predicament has resulted from a confluence of factors, including the COVID-19 pandemic, escalating materials costs, labour supply issues, main contractors failing to meet payment expectations, and banks reducing their support for the sector. With increasing cash pressures and banks reducing the availability of borrowing facilities, the traditional avenues for financial support are becoming less accessible. But what options does a construction business owner have during these difficult times? Thankfully, there are alternative financing structures available. At Branta, we're dedicated to helping you navigate these financial waters and move your business forward. The Current Financial Landscape in the Construction Industry The global COVID-19 pandemic has wreaked havoc across all sectors, and the UK construction industry hasn't been spared. The pandemic has disrupted supply chains, leading to increased costs for materials. The problem has been compounded by labour shortages due to Brexit-driven immigration policies and self-isolation requirements. Moreover, main contractors are not meeting payment expectations, exacerbating cash flow issues for many businesses. Banks, traditionally a reliable source of funding, are reducing their support for the sector, leaving many companies in the lurch. And finance directors are increasingly anxious as cash always seems to arrive too late. Late payments can wreak havoc with a company’s reputation, which in turn hampers their ability to procure labour and materials. Which may then affect their hard-earned commercial advantage when tendering for new work. Issuing a notice to suspend work - a last-ditch effort to remedy non-payment - is proving to be a futile exercise rather than a solution. These mounting pressures have left many construction firms in a precarious financial position, struggling to see a long-term future for their company. What Does This Mean for Construction Business Owners? In these challenging times, construction business owners may feel like they're in a financial squeeze, with dwindling resources and limited avenues for financial assistance. This could lead to a slowdown in operations, layoffs, or worse, business closure. However, it doesn't have to be this way. There are still viable financial solutions available, and that's where alternative financing comes into play. Managing cash flow is a universal challenge for businesses, with 61% of small business owners regularly struggling with cash flow issues. Poor cash flow management can lead to serious problems, even when a busine ss appears profitable. The struggle to maintain cash levels often stems from a variety of factors. Low profit margins, holding too much stock, giving customers too much credit, and unnecessary spending are all common causes of cash flow shortfalls.  Moreover, small and medium-sized businesses are particularly prone to irregular cash flows and limited liquidity. This makes it crucial for these businesses to pay close attention to their working capital and cash flow management. Introducing Alternative Financing In the face of these challenges, where should a company turn if it needs additional financial support? Traditional UK banks may not be the most reliable source of aid in these trying times. Thankfully alternative financing options exist that construction businesses can explore. These include solutions from various non-traditional sources, but companies should be assured that alternatives to traditional banks do exist. Alternative financing refers to financial channels, processes, and instruments that have emerged outside the traditional finance system such as regulated banks and capital markets. These may include peer-to-peer lending platforms, crowd funding, invoice trading, supply chain and trade finance, among others. These financing options can offer more flexibility, shorter approval times, and potentially lower interest rates compared to traditional banking facilities. How Can Branta Help? At Branta, we understand the financial challenges faced by businesses in the construction sector. That's why we're committed to guiding you toward the most suitable financing options that will support your business's needs. Our team of dedicated professionals will work closely with you to understand your business's unique challenges and goals, allowing us to recommend the most appropriate financing options. Whether it's identifying suitable alternative financing structures, helping you understand the risks and benefits, or assisting with the application process, we're here to help every step of the way. Take the Next Step Don't let financial constraints hold your construction business back. There are alternative financing options out there that could provide the financial support you need to keep your business thriving even in these challenging times. Contact us at Branta today to learn more about how we can help you navigate these alternative financing options and keep your business on the path to success. Conclusion Navigating the current financial landscape in the construction industry can be daunting, but it's not a journey you have to take alone. With the right guidance and access to alternative financing options, your construction business can weather the storm and emerge stronger. Reach out to us at Branta today and let's explore how we can build a stronger financial future for your construction business together.