The vast majority of firms in Wales which have been acquired over the last decade, in exit deals with a combined value of £2.5bn, continue to trade here, shows new in-depth research from corporate advisory firm Gambit.
And the majority of exit deals involving around 700 Welsh businesses between 2007-16 were to other UK businesses (via trade sales) or to their respective management teams, through management buyouts.
For the purposes of the analysis nine exit deals with values of more than £100m each, which collectively accounted for another £2.5bn worth of exits, were not included in Gambit’s analysis – nor were property deals and those involving subsidiary businesses in Wales of overseas companies.
These deal over £100m included the de-listing of Cardiff-based Gyrus for a reported £1.17bn to Japanese conglomerate Olympus.
Included are exits whether in the form of trades sales, buy-in and buy-outs, divestments and flotations – as well as Welsh firms de-listing from the London Stock Exchange.
These types deals generated a combine value of £2.5bn.
Geographically south Wales dominated exit deal flow, accounting for more than 80% of the transactions analysed by Gambit, which is based in Cardiff Bay.
The average consideration below the £100m threshold was £8.7m, down from the £10.1m in Gambit’s last exit deal survey for the 2001 to 2006 period.
Welsh exit deals experienced their lowest point in 2011, with a combined value of just £50m. The peak, including deals involving those for more than £100m was just prior to the financial crisis in 2007, with a combined value total of more than £2bn.
Over the period the most popular form of exit was through trade sales, which made up 72.8% of all transactions, followed by management buy-outs with 21.6%.
The largest management buyout deal on value was £87m for Bluestone Resort in Pembrokeshire in 2013, followed by Tregedar-based Penn Pharmaceuticals Services in 2007 for £67m.
Flotations on the London Stock Exchange, providing an exit, or partial exit for shareholders, remain what Gambit describe as “rarities” in Wales, with only 11 over the decade. The largest was last year’s £131.1m float of Bangor-based property development firm Watkin Jones.
Nearly 75% of exit deal were to other UK businesses or their own management teams.
Still in Wales
And of the 700 deals analysed by Gambit, 570 remain active today, which the corporate advisory firms says “dismisses the myth that ownership change creates a negative impact on the Welsh economy.”
The report adds: “So it is not accurate to say that exited businesses are relocated away from Wales. On the contrary, 85% remain active and are still based in Wales; some perished, but very few moved away.”
Brian Morgan of Cardiff Metropolitan University said: “For those people that have worked hard to create a successful company, management buyouts are an important vehicle for realising the true value of their businesses.
“What is not always appreciated is that achieving the right value can also have a positive impact on the Welsh economy. AS this survey shows, the vast majority of companies involved in a successful exit have remained in Wales.
“In this sense, attaining better value for company exits is good for the Welsh economy.”
Senior partner with Gambit. Frank Holmes, said: “This is our third publication on Welsh company exits. The period under review reflects extreme economic peaks and troughs of boom and bust, followed by slow recovery and prolonged economic uncertainty whilst the UK faces up to predicting life after Brexit.
“The trends, while predictable at the macro level, dispel some myths on the economic impact of changes of ownership and highlights the need to encourage longer-term ambition to create larger home-grown companies in Wales.”
Whist companies of all ages were exited over the period, more than 34% had enjoyed a life of between 10 and 25 years. Gambit said this increase in the corporate age trend is not surprising relative to previous surveys where 65% of companies were less than 15 years old.
Economy Secretary Ken Skates said: “This is an interesting research report which provides a useful insight into the mergers and acquisitions picture in Wales over what has been an economically turbulent decade.
“I am hugely proud of the economic progress we have made in recent years but we know there are further challenges ahead as we seek to navigate the UK’s exit from the EU. Our response must be to work together and develop more resilient regional economies in order to build a stronger and fairer economy for everyone in every area of Wales.
“We are currently developing our approach to economic development to focus on a closer partnership between Government and the business sector and the findings of this report provide an interesting backdrop to this work.
To view our Survey of Welsh Company exits 2007-2016 please click here.
To view this article on Wales Online please click here.