Uncertainty around deal execution has stunted mandate wins in the UK market, as advisors hope for a revival in second-half M&A.

Dampened confidence due to continuing volatile macroeconomic conditions and tightening debt financing, as well as a reluctance from prospective sellers to narrow bid-ask discrepancies, have also exacerbated the mandate landscape, practitioners said.

“If we pitch to sell a business, clients are challenging us around valuation and if it is not meeting their needs or desires, then they are not choosing to embark,” said Mark Naughton, partner at FRP Corporate Finance. Telling clients that recent evidence could suggest valuations are lower and trying to give that feedback can mean that the mandate moves elsewhere, he added.

Transactional uncertainty due to a difference in buyer and seller expectations has also meant that parties are less willing to incur upfront costs associated with mandate wins, added Gillian White, partner and head of M&A at Howard Kennedy.

“Clients want fee certainty but it is an uncertain environment and they want their advisors to share their deal risks, she said. “Transaction timetables have extended – this may serve buyers but can be tricky for sellers to navigate especially in challenging economic circumstances,” she added.

Despite subdued dealmaking activity in the first half, mandate opportunities could pick up after the European summer, assuming an uptick of dealmaking activity in the UK, practitioners said.

“The key issue is whether the relevant deal process for which the mandate is being awarded will launch this side of the year or at the start of next year,” said McDermott Will & Emery partner Tom Whelan.

And in anticipation of higher deal volumes, advisors are increasingly looking to reposition towards hot upcoming sectors.

“To make ourselves more competitive, we tend to highlight our experience doing deals in the specific sector that the mandate is about,” said Norton. We know that privately owned businesses have groups of shareholders having different objectives and we can navigate the interest of these parties very well,” added Naughton.

“Quite a lot of activity is happening in professional services that we have not traditionally seen. PE especially are waking up to opportunities in the sector,” he added.

Recent deals in the space this year include Hg’s sale of a portion of its stake in accountancy, tax and payroll specialist Azets to PAI for an undisclosed fee.

Elsewhere, technology, healthcare, energy transition and consumer are among the sectors which are active in the UK market, added McDermott Will & Emery’s Whelan.

Among the upcoming sale processes expected to offer up mandate opportunities for advisors are Montagu-backed security and defence specialist Janes, which was reported to have attracted private equity firms who expect the asset to come to market later this year. The company has a score of 79 out of a possible 100, according to Mergermarket’s Likely to Exit (LTE) predictive algorithm*, partially driven by the asset having been held for roughly the same median period as similar funds.

Bain Capital’s marketing data and analytics group Kantar was reported to be a sale candidate for the coming year and had an LTE score of 69, partially driven by the cumulative number of articles in which the company was mentioned as a sale candidate.

Other processes scheduled for the second half of the year include Hg’s upcoming sale of IRIS Software, Partners Group’s sale of IT services company Civica, as well as CVC‘s plans to sell UK-based IT-training provider QA. 

by Charlie Taylor-Kroll and Cristiano Dalla Bona with analytics by Kiki Skarvelaki

*Mergermarket’s LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction. 

Advisory opportunities – UK highlights from Mergermarket’s proprietary coverage

Camena Bioscience (17/07/2023)

Camena Bioscience, a UK startup developing technology for synthesising DNA molecules, is considering raising a Series B funding round of around USD 30m for an undisclosed stake late next year, CEO Steve Harvey told Mergermarket.

The company also talks to investment banks regularly and would consider using a corporate finance advisor, Harvey said.

Zumo (20/06/2023)

Zumo, a UK embedded digital asset platform provider, is seeking to raise between GBP 15m and GBP 20m in 2024 to grow its B2B product offering, CEO Nick Jones told Mergermarket.

Zumo will likely hire a financial advisor for the Series A, and is open to speaking to financial advisory firms, Jones said. Fundraising plans will begin in 4Q22, the executive said. The Series A will be a minority stake, Jones said.

SiSaf (19/06/2023)

SiSaf, a UK biotech company developing RNA therapeutics for rare diseases, is in talks with potential investors to raise around USD 50m for an undisclosed stake in a Series C round, CEO Suzanne Saffie-Siebert told Mergermarket.

SiSaf plans to close the round in the next six to 18 months and the goal is to complete Phase I testing of SiSaf’s lead candidate therapy for the treatment of osteopetrosis ADO2, said the CEO.

Ideal investors in the Series C round would be US life science investment firms with expertise in taking companies to an IPO and M&A stage, said Saffie-Siebert. SiSaf is looking for a corporate finance advisor to help the company raise its Series C round and grow to the clinical phase.

ClearBank (14/06/2023)

ClearBank, a UK-based clearing bank, has a “target list” of US banks it would like to buy, and is also talking to investment banks about an IPO, CEO Charles McManus said.

The firm, which anticipates reaching GBP 500m revenue in the next two to three years, needs a banking licence in the US and is ready to allocate capital for M&A, McManus said. It would like to acquire in the next 12 to 18 months to speed up the process of entering the US market, as opposed to waiting three years for a federal banking licence, he said.

Ideal target sizes would range between USD 20m and USD 50m, he said.

ClearBank is in initial conversations with a number of financial advisors, but no mandates have yet been assigned, he said. A few investment banks are “softly pitching” ideas in an attempt to win mandates, he said, adding that ClearBank has a close network of advisors provided by investor Apax Digital’s connections.

QuantrolOx (30/05/2023)

QuantrolOx, an Anglo-Finnish startup developing automation software for quantum computers, will start talking to both strategic and financial investors in December to raise a Series A funding round, CEO Vishal Chatrath told Mergermarket.

QuantrolOx would like to raise EUR 15m-EUR 20m in the upcoming round, although the precise amount will depend on market conditions and deal terms, Chatrath said.

Management is receptive to approaches from M&A advisors who can broaden its network of potential investors, Chatrath said.

Value.Space (24/05/2023)

Value.Space, a UK- and Estonia-based insurtech, expects to start raising up to EUR 10m in Series A funds from August-September 2024, founders Reijo Pold and Agu Leinfeld told Mergermarket.

The company, which provides satellite-based radar technology to monitor and assess risk in infrastructure, anticipates ceding a minority stake in exchange for an investment, said Pold, who is the company’s chief strategy officer.

Management will prioritise value-adding strategic investors from the insurance and finance industry, he said, adding that the details of the round are yet to be determined. The business plans to handle the Series A internally, and will engage a legal advisor, he said.

Oxford Medical Products (11/05/2023)

Oxford Medical Products, a UK-based developer of a weight loss treatment, plans to start a USD 20m-30m Series A capital raise in 4Q23, CEO Camilla Easter told Mergermarket.

The company is considering hiring a financial advisor for the raise, as it is significantly larger than its previous rounds, Easter said. It is in the process of looking for an advisor, she added.

Lanistar (10/05/2023)

UK-based fintech Lanistar will start approaching potential investors in the European summer in a bid to raise more than USD 200m in funding over the next two years, CEO Jeremy Baber said.

The closely held startup plans to begin formal conversations with investors including venture capital and private equity firms, family offices and sovereign wealth funds once it reaches 1m customers, Baber said. This should happen by the end of July, he said.

Management is receptive to approaches from M&A advisors offering assistance with its fundraising strategy, the executive said.

Payhawk (19/04/2023)

UK-registered corporate payments and expense-solutions provider Payhawk considers opportunistic acquisitions as part of its international expansion strategy, CEO and Co-Founder Hristo Borisov told this news service.

The fintech, which was valued at USD 1bn in its latest USD 100m funding round last March, wants to use M&A to support its customers across all the global markets in which they operate, Borisov said.

It is keen to look at deals for peers in geographies where it has not yet established a footprint, the CEO said, highlighting Australia as well as Asia, Latin America and Africa as potential destinations.

The company does not have any exclusive agreements with M&A advisors and is receptive to approaches from firms with attractive opportunities, the executive said.

Equals Group (14/04/2023)

Equals Group [LON:EQLS], a UK-based B2B payments platform, will monitor further bolt-on M&A opportunities following its acquisition of Belgian peer Oonex last month, CEO Ian Strafford-Taylor told Mergermarket.

The London-based fintech is keen to complement its planned organic growth by adding revenue streams and customers through M&A, Strafford-Taylor said. Potential targets include smaller B2B businesses that offer similar services to its existing offering, which includes payments and FX products, he said.

Equals prioritises deals worth up to GBP 10m over larger transformational transactions, which are often more complex and can require fundraising, Strafford-Taylor said.

Management is receptive to approaches from advisors with ideas of potential acquisition targets, the executive said.

CytoSeek (05/04/2023)

CytoSeek, a UK-based developer of cell therapies for cancer patients, is in the process of raising a seed-plus round of GBP 6.4m, CEO Carolyn Porter said.

The company is in advanced discussions with a few potential investors from the UK and Europe and is looking to close the seed-plus round in 3Q23, Porter said. Existing investors Science Creates-Ventures, Parkwalk Advisors, and Meltwind have signalled their interest to reinvest, she added.

A subsequent Series A raise of a minimum GBP 25m – GBP 30m is scheduled to launch in mid-to-late 2024, Porter said.

The company would likely seek a corporate finance advisor for an exit transaction but has enough in-house M&A expertise for the capital raisings, Porter said.

For a full list of the M&A advisory opportunities in the pipeline click here.