Jerry Scriven, partner at MC Vanguard Corporate Finance, makes his market predictions for 2019:
When it comes to investment activity we will continue to see polarisation between sectors attractive to acquirers and investors and sectors deemed much less so.
Investment is linked to risk and certain sectors are greatly affected by the risk exposure posed by the ongoing uncertainty around Brexit. On the flip side this is fuelling interest in sectors not exposed to this risk. For example, investment activity is on the rise in the healthcare market where businesses are developing a range of solutions to care for an ageing UK population. Facilities management businesses are also securing investment, particularly those like Fieldway Supplies that have secured long term contacts with recurring revenue streams. The recruitment sector has also seen the rapid growth of specialist labour providers due to the shortage of high quality labour and the drop in EU workers coming to the UK.
One micro trend we see continuing into 2019 is investment into smaller businesses with growth potential. Private equity (PE) houses are now seeing the potential of investing in smaller businesses they would have previously overlooked for bigger SMEs. In the current market there is a lot of money to invest but a shortage of bigger businesses that fit the criteria. By expanding their search to include businesses with a turnover of less than £10m, PE houses have many more opportunities to invest.
Another micro trend developing is advisory teams working with companies much earlier on in the process to help prepare the business for change. These businesses tend to be growing SMEs which have a clear vision of where they want to take the business and see the value in engaging with advisory services upfront with a view to preparing the business for future investment, perhaps up to two years in advance. In light of the recent Budget announcement on changes to Entrepreneur’s Relief taking a long-term planning approach has become more significant.
Deal of 2018:
Merseyside-based Fieldway Supplies, a provider of electrical installation and maintenance services, secured a £2m investment from Foresight Group, with additional banking facilities provided by Santander.
This deal shows the growing trend for talented entrepreneurs in growing SMEs in attractive sectors being able to secure significant investment from proactive, supportive partners like Foresight.