Healthy appetite for M&A activity across Scotland

KPMG surveyed some of the country’s leading dealmaking professionals at its M&A Forums in Glasgow and Aberdeen and found more than half (57 per cent) expect the majority of deal activity will take place in Scotland’s SME sector. North American companies are also predicted to be heavily involved in Scottish deals over the next 12 months (62 per cent), closely followed by the Far East (34 per cent).

However, nearly two-thirds (60 per cent) of those surveyed believe the biggest barrier to deal activity continues to be the disparity in price expectation between buyers and sellers. Within that, the majority don’t expect prices to start converging anytime in the next three months, with a significant amount indicating the sector won’t see the gap reducing for at least 6-12 months (57 per cent).

Access to funding is no longer a problem for 95 per cent of those surveyed, and confidence in the banking and private equity sectors’ readiness to lend, is high, with the majority of dealmakers indicating funding for growth businesses will come from those areas (89 per cent).

Dane Houlahan, Head of M&A in Scotland for KPMG, said: “It’s not surprising dealmakers are predicting high levels of M&A activity in the next 12 months. The economy is, by and large, in a healthier state and the banks are in a strong position to lend to ambitious businesses across the country.

“The US economy has been faring particularly well and as indicated by dealmakers, we may see larger American organisations acquiring both successful Scottish firms, while also throwing a lifeline to struggling SMEs in the oil and gas sector as they look to absorb North Sea expertise into their own organisations. We could also see an increase in deal activity between oil and gas businesses in Scotland, with firms looking to take advantage of the landscape and pick up assets at cheap prices, while also selling off their own non-core divisions as a cost-saving exercise.”

“A lack of convergence in price remains a significant barrier in the eyes of dealmakers across the country. The findings suggest we may only start to see deal activity pick up in the latter part of next year.”