by James Lawrence, a partner at Hewitsons and head of the law firm’s Corporate Finance team in Cambridge.

At the beginning of the year, I was reporting that the Hewitsons Corporate team had seen a marked increase over the preceding six months in the number of M & A transactions involving overseas buyers, both from Europe and North America.

The last six months or so have seen a reversal of that picture from our perspective. The transactions which the Hewitsons team has handled in that period have predominantly featured either UK-based purchasers or investors, or at least UK-based investment funds. 

There remain plentiful sources of funds looking for good investments and investment appetite has been good across a range of business sectors and deal structures. 

Examples of deals we have been involved in have included – on the public markets:–

• We acted on a reverse takeover of Levrett plc, which has a standard listing on the London Stock Exchange, by Cambridge pharmaceutical development company Nuformix, and an associated fundraising of £2.3 million. This complex transaction is due to complete imminently.
• Management buy-outs in the business services sector which have attracted UK bank and equity funding
• Sizeable buy outs in the housing and construction supply sector by UK private equity houses (albeit with some overseas funding), generating strong returns
• Acquisitions for clients in the professional services sector looking to consolidate their market position
• Large property joint venture projects, with shared funding obligations.

In the M & A field, our experience is that pricing of deals has generally been sensible, with buyers prepared to pay decent, if not generous, profit multiples. 

We have also found that, once a price has been agreed, buyers have tended to stick by their original offers and have not sought to re-negotiate the price as a result of due diligence findings in the course of the deal.

This demonstrates that the market is pretty balanced, with neither buyers nor sellers having any stronger bargaining position: Sellers have proved confident enough to walk away from a deal rather than accept a price which undervalues their businesses. 

Whilst there could be a case for saying that owners are underselling the attractions of their businesses, my view is that this is both positive and healthy.

As to the strength of international investment into the UK, whilst it is only a relatively short period in which to draw any clear judgments, it seems that the European corporate investors are focusing more on their own markets, whether in their local jurisdiction or elsewhere in Europe. 

In spite of the fact that sterling has declined against the euro over the first nine months of the year, the faltering Brexit negotiations no doubt bear some responsibility for this, generating greater business uncertainty as the prospects of any visibility on future trade deals weakens and encouraging a hardening of attitude towards the UK.

The same may be true for North American corporates where, for reasons more associated with their own political climate, the attention is more on their domestic arena and diluting their overseas ambitions. 

It is inevitable that in relation to overseas investment there will be a tendency for US corporates to look more carefully within countries which will provide access to the EU market for their products, particularly against a background of some improved economic indicators and political climate in some EU countries. 

With sterling up around 10 per cent from its low point at the beginning of the year, investment in the UK is not as good value as it was in the last half of 2016.

This paints an encouraging picture in terms of UK business confidence, especially if you are of the view that the sale to international buyers of so many strong UK businesses (including the slew of recent Cambridge companies) is unhealthy. Perhaps this is the sign of a greater dose of self-belief which will start to level that playing field.

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