Pricing reality check as M&A deals surge

Scotland’s corporate dealmakers are optimistic about the prospect of heightened mergers and acquisitions (M&A) activity over the coming year but there continues to be a disparity in price expectation between buyers and sellers.

Dane Houlahan predicts US help for Scottish firms. Picture: Contributed

A survey by accountancy giant KPMG, released yesterday, suggests that more than half of dealmaking professionals expect the bulk of M&A activity in 2016 to focus on small and medium-sized enterprises (SMEs).

North American companies are predicted to be heavily involved in Scottish deals over the next 12 months, closely followed by the Far East.

However, nearly two-thirds of those surveyed believe the biggest barrier to deal activity continues to be the gulf in pricing expectations between buyers and sellers.

Within that, the majority do not expect prices to start converging anytime in the next three months, with a significant amount – 57 per cent – indicating the sector won’t see the gap reducing for at least six to 12 months.

Access to funding is no longer a problem for the vast majority of those surveyed, with confidence in the banking and private equity sectors’ readiness to lend running high.

Dane Houlahan, head of M&A in Scotland for KPMG, said: “The US economy has been faring particularly well and... we may see larger American organisations acquiring successful Scottish firms, while also throwing a lifeline to struggling SMEs in the oil and gas sector as they look to absorb North Sea expertise into their own organisations.”