M&A wave hits the mid-market

Mergers and acquisitions (M&A) are no longer reserved for large corporations, with a wave of activity hitting the mid-market, new research from Shawbrook reveals. More than half (56%) of firms are either actively involved in a merger deal, or have recently completed one.

M&A as a growth engine

For the vast majority of medium-sized firms, M&A activity is a proactive strategic choice. Among those firms interested in, or actively pursuing deals:

• 30% are pursuing M&A to accelerate their growth trajectories
• 30% are looking to manage increasing demand for their products or services
• 26% are using deals to enter new markets or gain access to additional expertise

Barriers to entry

Of the businesses who are not interested in M&A activity, there are several potential limitations, including lacking the necessary financial structure, deal expertise, or strategic advice:

• 19% of businesses are not confident in managing the complex legal and due diligence processes required
• 19% feel unfamiliar with the M&A process and report they do not have the right advisors in place to support them
• 17% have struggled to find a suitable partner that aligns with their core values

Sector divergence

The research also highlights that appetite for M&A varies across different sectors and industries.

• Firms in the Sales, Media & Marketing (65%) sector are the most heavily involved in the M&A ecosystem, followed closely by Finance (64%) and Manufacturing & Utilities
• Merger activity is currently slowest in the HR sector, with only 17% of firms reporting an upcoming deal pipeline. However, HR firms were the most likely to have already crossed the finish line, with nearly one in five (19%) stating they have recently completed a merger

Neil Rudge, Chief Banking Officer at Shawbrook, said: “M&A has become an increasingly important growth strategy for medium-sized businesses, particularly as firms look to scale, enter new markets and build resilience in a more competitive environment.

“What our research highlights is that ambition within the ‘critical middle’ is strong, but these businesses often require more tailored funding structures and specialist expertise as transactions become more complex.

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“This is where specialist lenders can play an important role, supporting businesses with the flexibility, pace and strategic understanding needed to help turn growth ambitions into reality and ensure ambitious medium-sized firms are not held back at a critical stage of growth.”