2020 Deals Market Overview

As featured in the Scotsman Annual Deals Supplement 2020, AAB’s Callum Gray (Director and Head of Deal Origination) provides a deal market overview of 2020.

There is typically a three month lag between deals being negotiated and being reported and that is true this year as in others. We’re now starting to see lots of deals getting announced that we were working on in the second half of 2019 and in the first quarter of this year until Covid-19 led to lockdown. In quarter one we had around 16 transactions across the line which was much in line with expectations. Some deals still got done despite the pandemic, but a lot of transactions that we would have expected to complete in the second half of this year are being put into 2021.

In the current situation people are rightly taking stock. We can see that people have taken the last three months to assess their own business and look at where things are in the light of the impact of coronavirus before making any big decisions. It’s positive that we’re now actively working on three or four mandates where larger groups have said “we are through this, we understand where our business is, we’re now ready to get going and can see the opportunities”.

But price expectation has clearly been affected by the events of the last few months and values today are likely to be very different than the way a year ago.

While some people did put a pause on dealmaking during the height of lockdown they are now coming back to negotiations to complete transactions. They are taking the view that we’re now through the worst of the situation. While deals could be prepared during lockdown the restrictions obviously made conversations between buyers and sellers more difficult. It’s not easy to have a good dialogue over a conference call, especially at the outset of negotiations.

Another thing we saw in some instances was people looking to cash in their chips now with the view that Entrepreneurs Relief, that reduces the amount of Capital Gains Tax on a disposal of certain businesses, was going to be reduced or removed by the UK Government.

We’re seeing funding for deals coming from various sources, from private individuals to equity and growth funds. Transactions can take slightly longer than usual at the moment because of the need to get up-to-date management information that will indicate how businesses have dealt with the pandemic.

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