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There is a strong demand for acquisitions in the lower and mid-markets as businesses seek to enhance their value

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We spoke to TIARA judge and sponsor, Philip Ellis, owner of Optima Corporate Finance, about TALiNT Partners’ TIARA Awards prgramme and how the M&A is fairing in a challenging market. Philip specialises in advising recruitment businesses on acquisitions and fundraising, primarily in the recruitment sector.

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TI: Generative AI is dominating the news and it has mixed reviews. What is the trade buyer’s view on that? Is it helping to increase the valuation of recruitment businesses?
PE: To date we have not seen any transactions where generative AI has impacted a deal. HR Tech businesses are incorporating this into solutions and recruitment businesses may be utilising those solutions to improve performance and efficiency, but that in itself should result in greater profitability rather than inflating the valuation multiple. A tech-enabled business is likely to be more favourably viewed by a potential acquirer than one which has failed to adopt technology.

TI: M&A slowed down quite a lot but you’ve been busy. What is really driving activity?
PE: There is a strong demand for acquisitions in the lower and mid-markets as businesses seek to enhance their value as part of their own journey towards value creation and potentially an event of their own. We work with a number of acquisitive businesses of this nature. For sellers, many owners get to a stage where they feel they have taken the business as far as they can and wish to realise value – in part or full – and become part of a larger business.

 

“In my experience, a downturn may lead owners to conclude that the time is right to sell, providing an opportunity for acquisitive businesses to expand. The key issues are risk and valuation expectations.”

 

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TI: M&A slowed down quite a lot but you’ve been busy. What is really driving activity?
PE: There is a strong demand for acquisitions in the lower and mid-markets as businesses seek to enhance their value as part of their own journey towards value creation and potentially an event of their own. We work with a number of acquisitive businesses of this nature. For sellers, many owners get to a stage where they feel they have taken the business as far as they can and wish to realise value – in part or full – and become part of a larger business.

TI: What are investors really interested in?
PE: I would say the top three considerations generally are quality of management, quality of earnings and scalability. All of these factors will determine whether a business is fit for the future and capable of delivering a return on investment for an acquirer.

 

“In my experience, a downturn may lead owners to conclude that the time is right to sell, providing an opportunity for acquisitive businesses to expand. The key issues are risk and valuation expectations.”

 

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