Overseas raiders eye Scottish firms

“There was a period of uncertainty following the EU referendum result in which we saw a number of deals put on hold while all parties considered the future implications with the information available,” said Jon Shelley, a partner at PwC .

“Since then, we have seen deal activity largely resume and a healthy level of interest from business owners looking to sell and potential buyers.”

The increase in activity partly reflects the recognition that currency movements may have created opportunities to buy companies in Scotland at unexpectedly low prices.

Noting that PwC advised on the recent acquisition of the Glasgow-based Matthew Algie coffee business by Germany’s Tchibo, Mr Shelley said the fall in the exchange rate made the purchase even more financially viable.

“We expect that this will be the case for many overseas buyers who may have been considering a UK acquisition as part of their growth strategy and may act opportunistically now,” he added.

Experts at KPMG expect more inbound activity in the short to medium term, with currency shifts likely to prompt bidders from a wider range of countries to look at Scotland.

“One opportunity could be increased activity and partnership with buyers from foreign countries such as China, South Africa, Australia and Canada, where a strong pound might have previously been more of a constraint,” said transaction services partner James Kergon.

Ally Scott, head of corporate finance at EY in Scotland, noted: “Overseas investors in particular are showing real interest in Scotland’s innovative businesses particularly in the technology, FinTech and Life Sciences sectors where in our view we can expect more mergers and acquisitions activity to occur in the year ahead.”

The prospect may spark alarm following a year in which control of high growth Scottish successes such as the Skyscanner flight search business has moved overseas.

But experts say the traffic will not be one way. While uncertainty about trading links and the fall in the pound creates complications, the low growth environment in the UK will increase the incentives for local firms to expand overseas.

“The current uncertainty is set to continue for the medium term, as the terms of any deal with the EU are unlikely to become clear for some time,” said Gavin Hood at Deloitte. “In this context it should be even more important for UK and Scottish businesses to reduce their dependence on the domestic market and look to overseas markets and new products to drive growth.”

Some firms may be in wait and see mode but others will be looking for the opportunities that may emerge amid uncertain times.

Andrew Ewing at Johnston Carmichael said: “We think companies are aware uncertainty will remain for several years and so life needs to carry on and strategic decisions still need to be made.”

With plenty of money available from banks and other funders, firms with a good story to tell can be confident of winning backing for expansion moves.

Some people may decide now is a good time to head for the exit. KPMG’s Dane Houlahan thinks strong performing owner managed businesses may see the next 12 months as a potential window for selling up.

Brian Aitken, a partner in Nevis Capital, underlined the Milngavie-based private equity firm’s enthusiasm for deals.

“We’ve seen a real upsurge in activity in Q4 and are going into next year busier than we have been for a while,” he said.

“Brexit hasn’t affected deal activity yet – but it will. I think that activity will slow as we approach the EU exit in 2019 and won’t really recover until after the General Election in 2020 ... Shareholders are realising that they really need to act now if they want a deal done before everything grinds to a halt.”