M&E acquisitions set to rocket

A series of takeovers and sell-offs will sweep the m&e contracting market as the effects of the wider economy reach the sector, according to a report by industry analyst Plimsoll Publishing.

The report has found that tightening of credit and a reluctance of the money markets to finance the next phase of development are forcing smaller companies to consider selling up to their larger rivals, and that larger players are looking to buy smaller firms to diversify and develop their businesses.

David Pattison, senior analyst at Plimsoll, said: “It has a great deal to do with necessity. Many of the larger players in the market, despite the downturn, are desperate to find new ways to develop their businesses, but with the current climate, costs are cut and business development is being slashed.

“So they need options to help them protect their futures and tap into existing revenue and profit streams.”

According to Pattison, financing a series of small acquisitions of key niche players in the market will give them two clear benefits: a quick route to increasing sales for relatively low cost, and a foothold in emerging sectors of the market.

For the past few years, the larger companies have been surviving on wafer-thin margins, most only making 3.3% or less.

Currently, 100 of the UK’s top 1000 players are losing money – evidence that their strategy of chasing sales and volume compromises profits.

Meanwhile at the other end of the market, an emerging group of 208 companies are smaller and high-focused. These fast-growing firms have been able to carve out niche markets, some with premium profit margins. The best are reporting sales increases of well over 43.6% per year and 5.7% margins.

However, despite the excellent returns, many are now eager to sell up.

In today’s market, selling their business makes sense as it brings the chance of stability and security to protect the business and accelerates the development of the company, thanks to extra resources.

The Plimsoll report analyses financial performance of the UK’s 1000 leading m&e firms and includes a future snapshot of each company.

The report rates each firm on their attractiveness as an acquisition and highlights the best companies to buy in the sector.