July 21, 2024

“The healthy levels of mid-market M&A activity that we experienced since late 2020 look likely to continue through 2023.”

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EXPERT ALSO SHARES HIS ADVICE ON THE PROS AND CONS OF GOING PUBLIC

Written by Neil Doyle

THE UK can still look forward to “healthy” levels of mergers and acquisitions in the second half of 2023, according to a leading business growth expert.

Matthew Hayes, the MD of Champions UK Plc, said: “There’s no doubt the continuing uncertainty over the long-term effects of the global pandemic, changing consumer behaviours, inflation and the Russian-Ukraine conflict pose a significant challenge for businesses. Yet dealmakers have, so far, been relatively undeterred and M&A activity has maintained its momentum. And the healthy levels of mid-market M&A activity that we experienced since late 2020 look likely to continue through 2023.”

Mr Hayes, who specialises in supporting clients to develop the best strategies for growing their business, continued: “One of the key questions we are often asked to help advise on is, what are the main advantages and disadvantages of going public?

 

“The biggest advantage associated with an IPO is fundraising. Once investors start buying IPO stocks, the proceeds from an IPO can be substantial. The company then takes this capital and typically puts it toward internal investments and expansion. The company can use the funds it raises for research and development, to hire more staff, or expand its operations in other states or countries. There are a variety of ways this new capital can be deployed to benefit the company.

“IPOs generate a lot of publicity. This, in turn, can drive more attention to the company and make investors interested in purchasing shares of its stock. IPOs are frequently covered in business news, which adds to the IPO buzz.

“Many companies that go public can end up having higher valuations. Because the public company has access to more capital and steadily grows its business, the shares of the company can increase in price over time.”

 

Setting out the drawbacks, he added: “The first factor a company must consider is cost. The company needs to work with an investment bank, which will charge underwriting fees — one of the largest costs associated with an IPO. Underwriting is mandatory to review the company’s business, management, and overall operations. Legal counsel is also required to help guide the company through the IPO. There are also costs associated with account and financial reporting. Companies will also accrue fees for applying to be listed on the exchange.

“From an investor’s perspective, investing in an IPO can also be a challenge. In many cases, individual investors don’t have enough information or historical data on the company’s performance to make a determination on whether an IPO is a sound investment.

 

Mr Hayes added: “Once a company goes public, it is now part of the public market. This means it is subject to scrutiny, market volatility, and investor sentiment. Every move and decision the company makes, such as a corporate restructuring, merger and acquisition, change in leadership, or release of earnings reports, will be reviewed closely by industry analysts and investors, who will provide their own opinions on whether the company is operating well or not. While the company’s leadership may not have had to worry about these aspects when it was private, a public company needs to keep these market pressures top of mind.”

Matthew Hayes is the Managing Director of Champions, a strategy-led growth and implementation partner for businesses with market leading expertise across strategy, digital, communications, creative and talent. It works with businesses in a state of transition, enabling them to achieve their strategic vision and increase EBITDA. For support in growing your business visit: championsukplc.com