Middle Market M&A
While there is much focus on large M&A deals, as well as a vested interest in start-up acquisitions, the middle market can at times be overlooked.
It is a curious situation as this sector provides the backbone to the M&A market in general. In an attempt to redress the situation, we take a look at the current state of the middle market.
The Middle Market
A broad definition of the middle market refers to the size of a company’s revenue or asset base. Now, although there is no specific revenue range, analysts usually accept that it may vary anywhere between £3.5 million to £690 million ($5 million to $1 billion).
With over 34,000 middle market businesses in the UK and contributing over £270 billion to the economy annually, the importance of the middle market cannot be underestimated. The annual turnover of these businesses is in excess of £700 billion, 20 percent more than the private sector turnover. The middle market economy continues to grow – last year it grew by an estimated 3.9 per cent and outperformed average UK GDP by 1.1 per cent – and continues to play a pivotal role in job creation and national growth during 2016.
Middle Market Deals
A recent example of middle market deal-making at the upper end of the spectrum was Siemens’ agreement to purchase CD-adapco for £0.69 billion in January. The idea was to ultimately sharpen their focus on growth in digital software and expand their portfolio into industrial software.
CD-adapco is a New York-based engineering software firm, which produce computer programmes that are used to simulate the processes involved in engineering. Their programmes have been used by NASA to overcome structural engineering problems and by Formula One team Renault, in order to simulate combustion, exhaust and cooling in their race cars.
At the other end of the scale, a £6.92 million deal was completed recently for the acquisition of Aurionpro’s US IT services business, by Saicon Consultants. Saicon offer professional services and purchased Aurionpro in order to enhance their IP-driven domain solutions, for financial service companies and banks.
While the middle market continues to grow year-on-year, market conditions present specific challenges to this M&A sector. Acquiring talent, facing product market competition difficulties as well as dealing with regulations and new technology, are just some of the challenges they face. However, for those companies which fall into this category, obtaining access to finance presents few difficulties. This is perhaps why the middle market will continue to present viable opportunities and see healthy activity in the coming year.
With representation throughout the Americas, Europe, Africa and Asia, Benchmark International can connect you with the right opportunity. To find out more, visit http://www.benchmarkcorporate.com.