Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner. Facebook Messenger An icon of the facebook messenger app logo. Facebook An icon of a facebook f logo. Facebook Messenger An icon of the Twitter app logo. LinkedIn An icon of the LinkedIn logo. WhatsApp Messenger An icon of the Whatsapp messenger app logo. Email An icon of an mail envelope. Copy link A decentered black square over a white square.

Rod Hutchison: I’m expecting a fresh flurry of M&A deals

Hopefully, even a change of government will not impact too much on the positive factors.

Rod Hutchison, of Aberdein Considine.
Rod Hutchison, of Aberdein Considine. Image: Aberdein Considine

Looking back at 2023, including the final quarter recession many leading experts had predicted, the UK economy suffered a relatively stagnant period.

There were small increases in growth followed by slight contractions during the year.

In the energy sector, which is the main focus of my practice, the energy profits levy as well as calls from certain political parties to cease exploration for new hydrocarbon resources had operators reconsidering their investment strategy in the UK North Sea.

That said, from a mergers and acquisitions (M&A) perspective, there were still a healthy number of deals around.

Our firm advised on a number of these in a diverse range of sectors, including energy, healthcare, agriculture, education, retail and professional services.

Cause for optimism

Set against the backdrop of economic challenges experienced in 2023, businesses may have beeen forgiven for stepping rather gingerly into 2024.

There is, however, cause for optimism on the economic front.

Conditions are generally looking more favourable than last year, with a period of small but sustainable growth and a modest drop in interest rates anticipated.

A positive economic outlook tends to grease the wheels of the M&A market and encourage deal activity.

Continued consolidation

We also expect there to be continued consolidation in a variety of sectors, including energy, care homes and healthcare, which could provide the impetus for a year of reinvigorated activity levels.

In addition, there are a number of companies which have previously secured private equity investment that are overdue for exit. We expect this and new private equity investment to give a shot in the arm to the M&A sector in 2024.

Indeed, we have already secured instruction on more M&A transactions than we had this time last year, and the pipeline looks pretty encouraging for the foreseeable future.

Global network concept image.
Image: Shutterstock

We have received several inquiries from business owners to assist them with transactions, on both the buy and sell side, and to aid them in restructuring their companies to be “transaction ready”.

It’s crucial to engage with professional advisors as early in the process as possible to ensure your business is prepped for market. Failing to do so can significantly raise the temperature of negotiations during the transaction phase of the disposal and, ultimately, impact negatively on either reaching a successful conclusion to the transaction or the exit price achieved.

Green opportunities

Needless to say, a buoyant energy sector continues to be a material factor in the number of M&A transactions involving north-east companies.

The renewables sector increasingly offers opportunities to companies in the energy supply chain to grow their business.

Areg (Aberdeen Renewable Energy Group), a supply chain- focused membership organisation of which I am a director, last year announced a record number of members.

Many of them are optimistic about the potential that exists in renewables in the near future, with the decommissioning of offshore infrastructure also providing opportunities.

Drilling rig and FPSO ship silhouette view with sunset golden hours sky
Oil and gas will remain part of UK’s energy mix for some time to come. Image: Shutterstock

Of course, important as the just transition to renewable energy is, there is a growing realisation that hydrocarbons are going to be a material component in the energy mix for the foreseeable future.

Increasing investment in the goal of net-zero hydrocarbon extraction, with offshore wind and carbon capture having an important role to play, creates another opportunity that north-east based businesses are well placed to exploit.

Also cause for optimism for start-ups

In addition to experiencing increased instruction on M&A transactions at the start of 2024, compared with last year, we have advised more businesses in the energy sector on tenders, securing investment and restructures.

We are not alone in seeing increased activity from clients in the energy sector and this should have a positive impact on the number of M&A transactions involving north-east companies in 2024 and beyond.

A well as the fact established businesses based in the north-east continue to thrive, there is also cause for optimism in the start-up arena.

Businesswoman's hand holding wooden blocks spelling out M & A.
Image: Shutterstock

ETZ Ltd’s energy incubator and scale-up “hub” is due to open in Aberdeen this summer.

This and other new initiatives in Aberdeen’s Energy Transition Zone are unlikely to result in an increase in company acquisitions in 2024. But they could well act as a further stimulus to private equity investment in the region this year, which bodes well for the future deals pipeline.

Chief mouser Larry at No10.
Chief mouser Larry has no plans to leave No10 but will there be a new human lodger there to keep him company after the next general-election? Image: Shutterstock

The upcoming general-election will undoubtedly introduce a degree of uncertainty to businesses and investors. Taking into account the importance of the energy sector to the north east, the next government should reconsider the energy profits levy.

Hopefully, even a change of government will not impact too much on the positive factors mentioned. These suggest plenty of potential for deals to be done in the north-east in the coming year.

If M&As are a barometer of the economic climate, there’s certainly cause for cautious optimism.

Rod Hutchison is a corporate lawyer with more than 20 years’ experience. He is a partner in Aberdein Considine‘s corporate and commercial team in Aberdeen, specialising in M&A.