A round up of the Scottish M&A Market in 2021, and the exciting times ahead for 2022

2021 can only be described as a bumper year for Scottish M&A activity. After a somewhat lull in the market during 2020, the market was due for a rebound in terms of activity levels and 2021 certainly provided this. The appetite for investment from Private Equity firms has been noticeable throughout the year as investor confidence returned, and we saw these levels soar past those of a pre-pandemic world. M&A activity levels remained healthy as companies looked to generate value and opportunities within the post pandemic growth sectors.  

The Technology sector in Scotland has been a key growth sector in 2021, and has been a real driving force in the overall market rebound. The growth experienced in the sector can be attributed to a handful of reasons, one of which is the strengthening of the tech ecosystem throughout Scotland. We continue to see a conveyor belt of high-quality technology businesses come out of Scotland, with established tech incubators such as Edinburgh’s CodeBase and ONE CodeBase in Aberdeen providing great support and a clear pathway for Scotland’s entrepreneurs. Tech scale-ups now have even more support available with the recent launch of AAB sponsored accelerator programmes HALO in Kilmarnock and STAC in Glasgow. 

Much like technology, the Business Services sector was a big winner in 2021, experiencing an exceptionally busy year for M&A activity which was achieved through a combination of business owners and investors feeling it time to realise their investments, and strategic acquirers utilising the opportunity and available resources to consolidate and expand. This was demonstrated as our AAB Corporate Finance team helped advise customer management business CXP Group in their disposal to Huntswood Ctc. 

As the wider economy continued to recover from the pandemic and market lows of 2020, the Energy sector very much followed suit and underwent a much needed rebound during 2021. The oil price saw a steady rise throughout the year and at time of writing sits at $89 p.b, a stark contrast to the c.$16 p.b lows of 2020, an increase in demand and the supply cap placed by OPEC being major contributors to this. The increase in demand and supply naturally flowed into the sectors M&A activity levels as the sector experienced strong deal activity throughout the period with this expected to continue across into 2022, as we see an increased number of companies begin to reposition themselves to the renewable and green energy subsectors as they strive to meet their net-zero targets.   

Elsewhere, the Construction & Property sector underwent a tumultuous 2021, with many large-scale projects given the go ahead, only to be hampered by significant supply chain issues, felt by almost every business across the sector. The second half of 2021 had begun to show signs of improvement, however delays seen to construction work from Omicron resulted in a slow end to the year. There is general optimism that the supply chain difficulties have passed their peak, with government investment in major infrastructure projects as well as a rise in commercial property construction offsetting a slowdown of housebuilding. Off the back of this increased optimism in the sector, we can expect continued M&A activity across the sector in 2022, as supply chain issues continue to ease.   

Aside from overall market activity across Scotland, our own Corporate Finance team at AAB have had a stellar 2021, successfully completing more than 50 transactions, with a combined deal value in excess of £750m. To name a few standout transactions, our team advised on Waldorf Energy’s £330m acquisition of Cairn Energy’s interest in the North Sea’s Catcher and Kraken fields, along with Donaldson Group completing the transformational acquisition of Stewart Milne Timber Systems, the third transaction AAB have advised the Group on over the past two years. As we head into 2022 and think about predictions for the year to come, we can expect deal activity to remain high as the market continues to rebound after the economic downturn of 2020 and confidence continues to grow amongst business owners and investors. 

Our Corporate Finance team at AAB have started 2022 with a flurry of deals, advising subsea rental equipment company STR in their investment from Baird Capital as well as acting on behalf of PUMA Private Equity in their £5m investment into developer marketplace platform Deazy. Our team is excited on what 2022 brings, already having a strong pipeline of deals to drive forward into the remainder of Q1 2022 and beyond.   

By Gordon Steele, Partner and Head of Deals (Aberdeen), as featured in the Press & Journal M&A supplement.