M&A can help companies keep pace with industry changes 

Given the uncertain nature of the UK economy and the prospect of a general election later this year, making an acquisition might not be the top priority for many business owners.

However, dealmaking provides businesses with an almost unique ability to adjust to industry changes and ensure that they remain relevant and competitive in an increasingly tough marketplace.

With financially distressed businesses on the rise and other owners likely to try and make an exit prior to the general election, there should be a significant number of UK businesses for sale during 2024.

Furthermore, with many prominent UK industries undergoing rapid changes driven by factors such as sustainability and technology and the need to develop a workforce well-equipped with “future-ready” skills, businesses are under growing pressure to adapt, keep up with competitors and secure their long-term viability.

Given the pressure businesses are under to adjust to these changes, organic growth is increasingly seen as being an insufficient and risky strategy for companies seeking to adapt quickly, whilst simultaneously continuing to perform strongly day-to-day.

Strategic M&A, on the other hand, can enable businesses to rapidly add new capabilities and skills to their workforce, extend product lines, grow geographic coverage, tap into the latest technologies or bolster their green credentials.

For that reason, companies that are able to secure the capital required to undertake M&A should carefully consider how they can use business acquisitions to help meet their strategic goals, keep pace with industry changes and prepare for the future.

A recent PwC survey showed that this is something business owners are increasingly recognising, with 63 per cent of respondents saying that they plan to undertake co-ordinated strategic change over the next three years and 35 per cent saying they do not feel that their business will remain economically viable unless they make significant changes in the next decade.

Against this backdrop, 56 per cent of respondents said that M&A was the most effective way of adapting to changes in their industry and securing the viability of their business. Net Zero goals and keeping up with new tech such as generative AI (genAI) were among the key challenges cited by owners.

Perhaps the biggest boost that M&A can bring, however, is enabling a business to rapidly upskill their workforce – a practice known as “acqui-hiring” that has seen renewed popularity over recent years.

Reflecting this, 60 per cent of owners said that they were likely to use deals to develop a workforce equipped with “future-ready” skills. By buying a business based on the capabilities of its workforce, companies can rapidly and efficiently bring in new skilled workers, something that is potentially far more effective than costly, time-consuming recruitment or training programmes.

The benefits of acqui-hiring

Acqui-hiring offers significant benefits for both buyers and the businesses being acquired. For buyers, particularly in the tech industry, this strategy serves as an efficient method to recruit highly skilled teams quickly. Acquiring a company means the buyer inherits a team that is already formed, vetted, and cohesive, saving the time and resources usually required for recruitment and team building. Talent gaps can mean that even major tech companies often face challenges in recruiting talent, and acqui-hiring provides a solution that bypasses the lengthy and costly process of individual hiring and training.

This approach is not only limited to large companies; smaller businesses in various sectors can also utilise acqui-hiring to bolster their expertise swiftly. While the acquisition costs can be substantial, they are often offset by the benefits of acquiring a team that can integrate and contribute to projects without the delay of training new hires.

PwC UK Value Creation Leader Roberta Carter commented: “In a market where competitiveness relies on agility, businesses must make transactions an integral part of their transformation strategy. They need to adapt at speed, but organic growth often loses momentum when set against the demands of day to day business operations.”

“To create the most value, leaders must align transactions with a bold vision. Deals that support the business’s ability to continuously adapt are more likely to succeed. By carrying out transactions and transformation simultaneously, leaders can establish a virtuous cycle whereby both activities unlock more value.”