A record-breaking online event has highlighted challenges and opportunities for mergers and acquisitions (M&A) activity in the north and north-east during 2021.
The Press and Journal Business Breakfast, in association with Ledingham Chalmers, attracted a bumper audience – more than 160 people – to hear a trio of M&A experts deliver their observations of trends in the market.
Rod Hutchison, a partner in the Aberdeen head office of Ledingham Chalmers (LC), was the first speaker up.
He was followed by Gordon Steele, head of deals at accountants and business advisers Anderson Anderson & Brown.
Last up was Nick Dalgarno, managing director of energy industry finance specialists Simmons Energy – a division of Piper Sandler.
Mr Hutchison joined LC in 2002 and specialises in corporate law, particularly within the energy sector.
He described how the M&A market effectively collapsed during the early part of last year as the UK went into its first Covid-19 lockdown.
But there was an upswing in the second half as confidence among firms in many sectors, including oil and gas, started to improve, he said.
I was left wondering when the M&A sector may reignite.”
Rod Hutchison, Ledingham Chalmers
Outlining the pattern of M&A last year, Mr Hutchison said: “In March 2020, transaction work fell off a cliff. Businesses focused on steadying the ship, and potential sellers and buyers of businesses waited to see how things would play out.
“Whilst my employment law colleagues were in great demand to assist with negotiating the newly introduced furlough scheme, I was left wondering when the M&A sector may reignite.
“It quickly became apparent that the restrictions on our freedoms were going to be around for quite some time.”
But by August 2020, LC was involved in multiple deals of all shapes and sizes, he said, adding: “Advisers and clients quickly adapted to doing M&A transactions in the virtual world.”
In common with the two other speakers, Mr Hutchison detected increasing M&A interest in businesses playing their part in the energy transition.
Mr Steele, who joined Aberdeen-based AAB as a corporate finance manager in 2005 and is now a partner of the firm, gave his predictions for which sectors were likely to attract the most interest from potential acquirers.
Financial services, technology, healthcare, and food and drink firms could feature prominently, he said.
In many cases it will be those businesses that have moved the fastest and most effectively to get their costs under control and their houses in generally good order that will attract most attention, he added.
There is also a realisation that the coronavirus is going to be with us for much longer than we ever envisaged.”
Gordon Steele, Anderson Anderson & Brown
Looking back on a “complete disaster” of a year for M&A activity in the region during 2020, Mr Steele said: “Q4 was when we finally saw deal flow start to return to some normality.
“In 2021, many acquirers and target companies have stabilised their businesses and are in a better place strategically.
“There is also a realisation that the coronavirus is going to be with us for much longer than we ever envisaged.
“Businesses are probably now of the mindset that we now just need to get on with life.”
Mr Dalgarno joined Simmons in 2003 from offshore logistics company Asco, where he was vice-president for commercial and legal work.
He previously worked as a corporate lawyer specialising in oil service M&A deals at Paull and Williamsons.
This year got off to a much better start in terms of M&A activity, compared with most of 2020, Mr Dalgarno said.
He added: “We haven’t missed a beat coming into 2021. We are now seeing the return of traditional, better quality M&A.”
Larger companies in the energy services sector are taking a “cold look at their portfolio businesses in the context of their post-Covid balance sheets,” Mr Dalgarno said, adding: “We should see some good quality opportunities there.”
We haven’t missed a beat coming into 2021.”
Nick Dalgarno, Simmons Energy – a division of Piper Sandler
Another big theme for the next few years will be an increase in private equity activity, he said.
Mr Dalgarno said businesses which have delivered strong performance during the pandemic would be “hugely attractive” to buyers.
He also forecast that Middle East money could be at the heart of some of the biggest deals globally this year.
The live event was recorded and can be watched in its entirety below and at www.pandjbusinessbreakfast.co.uk