Although we are technically ‘not’ in a recession, in many respects it feels like it given the economic issues in the UK. This will be made worse by the upcoming increase in Employers National Insurance contributions and this has pretty much been a discussion point with every client and prospect we’ve seen for months now.
The reduced benefit of the Business Asset Disposal Relief from April 2025 and again in April 2026 has also given way to a lot of activity and the bringing forward of a number of business sales.
Opportunities in a Downturn
However, out of every bad situation comes opportunity. In the past some of the world’s biggest brands and businesses have been established during economic downturns and even economic depressions. These include the likes of Disney, Microsoft, Google, Fedex, Uber and Airbnb.
Opportunity can present itself in many formats, including:
- The start of a new business or idea
- The addition of a new product or service to an existing business
- Opportunity to expand due to the loss of a competitor
- An acquisition
- The sale of the business
- Investment to carry out any of the above
Acquisition Opportunities
In this article we are focusing on acquisition opportunities and up to and including the search process. In future articles we will cover off the rest of the opportunity types.
Acquiring a business can be an excellent strategy for growth, efficiency, and market dominance, especially in times of economic uncertainty.
Benefits of an Acquisition
The benefits of an acquisition are many, including:
- Entering new markets
- Buying an established customer base
- Inheriting existing supplier relationships
- A new or enhanced distribution network
- Access to key people
- Immediate revenue generation
- Eliminating or absorbing a competitor
- Synergies and cost savings (although often overplayed!)
- Gaining new technology (this is something the US do a lot of to take out overseas technology competitors
- Diversification
- Buying a supplier or distributor in vertical integration
- Higher valuation of the combined entity for a future sale (not to be underestimated. Larger businesses have higher multiples)
During difficult times and recessions, acquisitions can be especially interesting and relevant for a number of reasons:
- There can be less competition for the target business
- Valuations can be lower due to the market conditions
- Buying structures can be more advantageous than in normal times
- Distress sales = motivated buyers
- Access to businesses not normally available as owners may have just had enough (this was something we saw in and at the back end of Covid)
- Access to skilled people not normally available
- Costs can be lower going forward such as people, property, supplies (although this is less relevant at the current time as the cost of these are still high – however this may change)
- Economic downturns never last forever – they pass!
Considerations to Bear in Mind
However, any acquisition is always a risk, and you should always go into it with caution to ensure you are buying exactly what you think you are buying. Synergies and cost cutting measures are often overplayed and never reach the heights of the business plan, so making an acquisition for this reason alone is rarely the best move.
The first step is to define you acquisition search, goals and strategy. You need to be very clear on the ‘why’ and how it fits into the bigger plan/strategy. Is it all part of a coherent bigger plan?
Which of the benefits above are you looking for your acquisition to achieve?
Another key consideration is the cost of the acquisition and look at how it will be funded, and whether external funding/investment will be required.
A financial plan will be required to look at what an acquisition will bring to the table in financial terms, including the existing and new revenue it could produce, its costs, synergies and ultimate cashflows of the existing and consolidated businesses. This will also inform how much funding could be obtained, if required towards an acquisition. Often the business can look at larger acquisitions than it thinks once the cashflows have been combined and assessed and this may then change the actual profile of the business that can be targeted and searched.
Once the search parameters have been set, you then need to define the profile of the target in a more targeted way, i.e. the sector/niche, the size of the business, the geography, the growth potential and the cultural fit.
Only then can any form of search begin, and indeed only when you have fully thought through and define your strategy and profile, should any form of search begin.
The Search Process
There are various ways that your search can then be undertaken, including:
- Business marketplaces & databases – online marketplace showing businesses for sale, when you and others are looking for targets
- Companies House – helps with basic information but unless there are of a decent size, there will be limited financial information
- Leverage own network such as trade associations and LinkedIn
- Trade shows and events
- Business brokers – a volume business where you and indeed any sale is one of many
- Direct outreach and off-market deals – our preferred route to reach targets.
At Snowball we can help our clients with each stage from the strategy, goals, financial plan and defined profile/target, and then on to the search, which is where our expertise comes into its own.
The best acquisition targets are rarely listed for sale – proactively searching and reaching out can uncover great opportunities, and whilst they can often take time to source and build relationships with, they can often be the most interesting and rewarding acquisitions.
We have a proven process that follows these stages and then we use our access to a combination of leading-edge M&A data and our own bespoke AI enhanced systems and company and deal tracking to find the right potential targets, and we add our own expertise and manual input on top of this. We then approach those firms on behalf of our client to see if there is appetite/interest for further conversations.
The aim is only to approach the right companies with the right profile. This is not a numbers game. It is about finding the right company to buy, not send out as many emails to see what sticks. Ours is very much a personal service and we approach the targets in the same way.
We actually do the very same thing when we are acting on the other side when we are selling a business, and use the same processes, systems and personal service to find the right buyer for a business.
If you would like to know more about our service to source acquisition targets or find a buyer for your business, please do get in touch with us.
